Panel 3: The Controversy Over OMS/EMS Connectivity Fees

Moderator: Spencer Mindlin, Analyst, Aite Group

Panelists:

Jeff Estella, Former Director of Trading Analytics & Investment Operations, MFS Investments

Brian Mullane, Director, Buy Side Execution (REDI), Refinitiv

Brian Nathan, Global Manager, ITG Net, Virtu Financial

Amy May, Executive Director, Morgan Stanley

 

Brokers, their buy-side clients, and buy-side order management system vendors have become mired in complicated compensation structures that include many variables, such as bundled pricing, soft dollars, and blends of fixed and transaction-based fees. Products and services are sometimes paid for by parties that do not always consume the services but are their sponsors. Vendors compete vigorously to win desktops and must deliver mission-critical technology to multiple parties among the trade life cycle. And now the revenue models for how OMS vendors are paid are under the spotlight. Some of the key points of discussion include:

  • Aite Group estimated brokers paid US$1.23 billion globally in 2017 for client connectivity
  • The sell-side is under pressure and being forced to rethinking the viability of many of its traditional lines of business; net client profitability is a key metric
  • Regulations and standards for best execution are putting pressure on the buy-side to understand the value of what they receive from their partners as well as who is paying the bill
  • The true cost of buy-side technology is largely unrecognized across the industry