Waters Wrap: Examining the changing EMS landscape

A few weeks ago, a source tipped me off that London Stock Exchange Group was sunsetting its Redi execution management system in favor of Tora, which it acquired in 2022. It didn’t take too long to track down a couple of Redi users to confirm the rumor.

After talking with several people—customers, competitors, and consultants—I got the impression that while the Redi EMS wasn’t exactly beloved, it worked just fine for many users. And since traders are like me and don’t like change, it came as a surprise to some that this decision was made, because it opens the possibility that they’ll look to switch to a competing EMS rather than Tora.

One of the more interesting pieces of feedback I received—and this is from someone with more than two decades of experience in the EMS space—is that what separates EMS offerings is less about innovation, and more about “human” aspects.

“Everything is so goddamn commoditized from a functionality perspective,” said the source. “There’s no golden widget or feature that will win you clients. Everybody has a blotter; everybody has an algo wheel; everybody has a watchlist. There are varying degrees as to how proficient those things are at what they do, but there isn’t a whole lot of differentiation there.”

What separates one EMS from another—assuming that a trader is comfortable with the user interfaces and workflows—is pricing (shocker, I know), and service and support. Newsflash: Traders are demanding, and they don’t have patience when something goes wrong.

If that’s the case, I asked, isn’t it a race to zero—as in $0? They said that if the price is commensurate with the service and support offered, it all comes down to asset class coverage. And that’s where we’ve seen the biggest change.

When LSEG acquired Tora, Dean Berry told WatersTechnology that the OEMS was “built on a more modern tech stack,” referring to cloud and APIs. Also, it has that “O” component—order management—rather than being a strict EMS. This is the idea of the one-stop-shop platform.

But what really made Tora an attractive acquisition—and this is just my opinion based on conversations with a fair number of industry experts—was that it had a deeper fixed-income execution offering than what LSEG had on file, and it also had (perhaps crucial for the future) coverage for cryptocurrencies.

In light of these issues, the problem facing LSEG/Tora might be more of a matter of perception.

Though not the industry leader in terms of client numbers, Redi is a widely used EMS in New York, New Jersey, and Connecticut, the greater metro area that surrounds Wall Street; Tora was mainly a platform used by firms in the Asia-Pacific region and, specifically, Japan. (I say “was” and not “is” because that might’ve changed after the LSEG acquisition.) As such, there are concerns—fair or not—that Tora’s platform can’t handle the sophistication of a large prime broker or hedge fund. Essentially, the service piece will fall down under the weight of Wall Street trading. Or, even worse, the Redi-to-Tora switch will get lost in the shuffle of integrating other (more strategically important) platforms, such as Refinitiv/Workspace or its 10-year partnership with Microsoft.

As noted in our article that broke the news of Redi’s demise, many of Tora’s senior managers who built the product stayed on after the LSEG deal closed. WatersTechnology understands that this was a significant consideration in the decision to sunset Redi, whose executives have largely left after it was first acquired by Thomson Reuters/Refinitiv (2016) and then after LSEG acquired Refinitiv (2019). Again: a people problem more than an innovation one.

Many sources I spoke with were critical of LSEG’s Redi decision, but I really try not to let people sling mud anonymously. To this last point about execs, though, this makes a lot of sense to me. If LSEG is more focused on the larger Refinitiv integration and Microsoft-led tech stack modernization project, you don’t want to risk a mass exodus of senior managers because you decided to invest in Redi modernization—which would also create yet another major IT project for LSEG. You can only fight so many battles on different fronts before you’re stretched too thin.

But this is also where additional concerns arise. For a minute, ignore the Refinitiv and Microsoft projects, and ignore that senior management component. Since there have to be winners and losers and decisions have to be made, what is better for the majority of users in the long-term?

If you have the Redi product (perhaps under-invested in, but with a strong Wall Street client base) and you have the Tora product (more modern, but with a smaller client base that is based in Apac), rather than disrupt your Wall Street clients, would it not be better to invest in modernizing Redi and forcing Tora’s users to switch over? I don’t have an answer; it’s an honest question.

This, too, is a big part of the perception problem facing LSEG, as Redi/Tora’s competitors are circling.

Our reporting indicates that since Redi users are ostensibly being forced to switch to Tora, they’re at least looking at switching to a different EMS that is not Tora. (I should note, though, that no one confirmed to us that they were switching; WatersTechnology understands that LSEG hopes to have users migrated to Tora by the end of 2025.)

If you believe that from a bells-and-whistles perspective, the EMS space is commoditized, then the battle for customers will come down to price, service/support, and asset class coverage. In my reporting, the providers that came up most were Bloomberg and its EMSX offering; FlexTrade; Neovest, a subsidiary of JP Morgan; TS Imagine, born out of the merger of TradingScreen and Imagine Software; SS&C Eze; and FactSet’s Portware platform. I would also throw in Deep Systems and Enfusion, and other giants like Nomura’s Instinet/Newport platform, the Broadridge OEMS, and Ion’s new fixed-income EMS offering, though these are all more specialized products.

To wrap this up, though, let me seize on two pieces from that last sentence: OEMS and fixed income. While this has been the trend for quite some time, users want best of breed, yes, but if they can get order and execution from one system—rather than switching between different interfaces/screens, that’s an enticing proposition. And furthermore, fixed income is taking on greater importance on the buy side compared to equities, options, and foreign exchange.

Playing Devil’s Advocate, did LSEG not make the right decision to—as one chief information officer told me—“rip the Band-Aid off” and tap Tora as the winner over Redi? Again, Tora has a more modern tech stack, has an OMS offering (even if sources say it’s a “small ‘o’ offering”), and it has fixed-income (and crypto) execution. Is that not where the market is heading?

I’ll leave you with this from a source who knows the EMS space well: “We see the biggest opportunity—although it has taken a while to come to fruition—as being fixed income. If you are a firm looking to future-proof your business—maybe you’re already setting up a multi-asset class trading desk; maybe you’re setting up a systematic credit trading strategy—if you’re going to take a new system, you want something that has a strong story to execute fixed income. Otherwise, you have to go and bring in another system, which brings with it more integration and operational risk challenges.”

If there are integration delays and outages, I’m not sure how patient Redi clients will be. If the transition goes smoothly, it could prove to be an incisive decision to stabilize LSEG’s EMS value proposition. That’s what we’ll be watching for over the coming 20-or-so months.

Have some thoughts of your own? I’d love to read them: anthony.malakian@infopro-digital.com.

The image accompanying this column is “Vale of Kashmir” by Robert S. Duncanson, courtesy of the Cleveland Museum of Art’s open-access program.