Bloomberg Well Positioned in ASP Trading Applications
As we are settling into the “New Normal” and are picking up the pieces of the last 22 months many things have changed not least of which is electronic trading. Investment banks with their deep pockets would write blank checks to charge head long into brokerage services among them connectivity across many markets with many independent software vendors (ISV) entirely supported in-house. With the ballooning cost of infrastructure, maintenance and on-going development the cost of delivering robust offerings to a greatly diminished buy-side had become impractical.
One of the emerging trends has been to outsource technology and software back to the vendors in a desire to reduce costs and focus on core business lines. The application service provider (ASP) model has grown markedly in the past couple of years which has been the mainstay of Bloomberg. We’ve all used a Bloomberg terminal to find quotes and information or messaged a desk with an order or a friend for a social engagement where behind the scenes the technology has all been maintained and managed by the firm.
In the face of competition and tightening margins in the terminal business and not least of which the deep penetration within both the buy and sell-side Bloomberg has expanded along the trading value chain within the ASP framework. You are probably most familiar with the Execution Management System (EMSX), a broker-neutral trading tool that allows DMA or algo order routing to nearly 2,000 destinations (I don’t have specific numbers on Asia coverage, however). But there are other noteworthy applications serving different parts of the electronic trading vertical.
For the broker-dealer, Bloomberg’s Sell-Side Execution & Order Management System (SSEOMS) delivers a broker-neutral order management and trading platform. This application is fully integrated with the market data, news and analytics Bloomberg is famous for.
The post trade piece is also served by what Bloomberg calls its Trade Order Management System (TOMS). This is a straight-through-processing-centric sell side application offering trade capture, inventory and risk management, electronic order flow, regulatory reporting and compliance. In combination, an interesting proposition for the mid tier or entry level broker.
The buy side is equally served by the Bloomberg Asset and Investment Manager (AIM). This product leverages on Bloomberg’s core data and analytics, offering hedge fund managers, institutional asset managers and proprietary trading desks a compelling front-end package. It also comes with a solution for strategy management, compliance, financing, trade settlement, portfolio analysis, order management and electronic trading.
The resilient buy-sides who survived the Global Financial Crisis are now focusing on portfolio management, generating alpha and driving down costs. And the Tier-One firm blank check mentality has now dried up too. The application service provider model can only grow and evolve in the “New Normal”. Granted the latency sensitive and concerns about client identity and security will pose some challenges to this type of service model. But can any vendor be all things to all clients? I don’t think so either.