From the Editor:

One of the four talks in the opening general session of the Securities Industry and Financial Markets Association (SIFMA) Technology Management Conference & Exhibit is titled, “Electronic Trading: Then and Now.”

That title could almost be a subtitle for our cover story article on the drive to build a combined OMS-EMS. Understanding why vendors are divided about whether order management systems and execution management systems should be combined involves a look at where the industry has been, as much as where it is going.

OMSes first arrived on the scene in a time when the industry was much more paper-based. Their first accomplishment was to help transition the buy side to a more paperless environment, eliminating errors in the process. They later evolved to include the live price feeds and other features that are standard in today’s environment.

By contrast, EMSes emerged out of the algorithmic trading boom in the late 90s and they targeted a market with increasing analytic requirements.

As a result, today there are two systems, handling tasks from compliance, reporting, allocation, clearing and commission management to custom transaction cost analysis, dynamic algorithms, order and execution automation, sell-side order handling, and portfolio and program trading.

If done well, the new combined system could represent the next evolution in order management execution management technology. But some in the industry are divided on whether they want this possible next stage. Is it too cumbersome to have two different systems? Can one system handle all that functionality and still be nimble enough to shift with today’s changing market? Different viewpoints on the issue weigh in.

Meanwhile, elsewhere in capital markets as the US prepares for Reg NMS, Europe is readying itself for MiFID, which Microsoft’s Ian Warford likens to “the Big Bang for Europe.”

In banking, the state of the subprime mortgage industry has been described by some as a meltdown. More than two dozen subprime lenders have failed, most prominently New Century Financial Corporation, the country’s second largest subprime lender. But as news story after news story unfolds about the subprime lending crisis, lenders and vendors alike demonstrate how the ups and downs of the mortgage market are actually predictable using today’s technology.

Meanwhile, the insurance industry is just coming off the heels of one if its largest industry conferences. A special section of our news section this issue is dedicated to covering some of the biggest announcements from the ACORD LOMA Insurance Systems Forum held May 20-22 in Florida. Also, both title insurer First Canadian Title and Prudential Real Estate and Relocation unveil Web efforts. In First Canadian Title’s case, a new portal cuts costs by paring down the amount of time spent on business process transactions. Prudential combined two similar Web architectures, cutting costs in the process and laying a foundation that may possibly facilitate cross-selling opportunities in the future.

These stories represent just a few of the exciting technology developments occurring across the different segments of the financial services industry.

- Renee Wijnen Caruthers