Order Management System - OMS

What is an 'Order Management System - OMS'

An order management system (OMS) is an electronic system developed to execute securities orders in an efficient and cost-effective manner. Brokers and dealers use order management systems when filling orders for various types of securities and are able to track the progress of each order throughout the system.

An OMS is also referred to as a Trade Order Management System.

BREAKING DOWN 'Order Management System - OMS'

To execute a buy or sell order for a security, an order has to be placed on a trading system. An order typically contains information such as security identifier (e.g. ticker), order type (buy, sell, or short), order size, order limit (e.g. market, limit, stop, etc.), order instructions (e.g. day order, fill or kill, good-till-canceled, etc.), order transmission (broker, ECN, ATC, etc.), etc.

An order management system (OMS) is a software system that facilitates and manages the execution of trade orders through the FIX protocol. FIX, or Financial Information eXchange, protocol is an electronic communications protocol used to communicate international real-time exchange of information related to the trillions of dollars of securities transactions and markets. However, communicating transactions can also be done through the use of a custom application programming interface (API). The FIX protocol links hedge funds and investment firms to hundreds of counterparties around the world using the OMS.

The OMS can be used on both the buy-side and sell-side to allow firms manage the lifecycle of their trades, and automate and streamline investments across their portfolios. Typically, only exchange members can connect directly to an exchange, which means that a sell-side OMS usually has exchange connectivity, whereas buy-side an OMS is concerned with connecting to sell-side firms. When an order is executed on the sell-side, the sell-side OMS must then update its state and send an execution report to the order's originating firm. An OMS should also allow firms to access information on orders entered into the system, including detail on all open orders and on previously completed orders. The Order Management System supports portfolio management by translating intended asset allocation actions into marketable orders for the buy-side.

Some order management systems offer real time trading solutions which allows the user to watch market prices and execute orders in multiple exchanges and markets instantaneously by real time price streaming. Some of the benefits that firms can achieve from an order management system include managing orders, allocations and executions across asset classes from a single platform; automating pre-, intra- and post-trade compliance checks; tracking and reporting on the full lifecycle of a firm’s orders; etc.

OMSs are an important development in the securities industry because of the significant cost savings they provide to investment firms. Many versions of OMSs have been developed by various firms looking to capitalize on the increased spending made on these systems.