Order Management System for Crypto Trading
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Initially developed to address delays and lack of cohesion in trade, the Order Management System (OMS) has evolved across generations to serve crypto-asset trading platforms the world over.
Now how exactly does a cryptocurrency Order Management System work? And how is it beneficial for the present day digital currency trading system? Here’s a quick analysis.
What Is an OMS?
OMS aids financial markets by automating and integrating tasks so that trade order life cycles can be processed into a single system. The system includes operations, namely, capturing and routing orders, searching for counterparty, order reconciliation, etc.
In traditional stock markets, trade OMS connects the buy-side to the sell side, for example, it connects fund managers to investment banks. OMS’s functionality varies based on the market segment it caters. While a trader uses the software for placing ‘buy and sell’ orders, brokers offer trading services to their customers via an OMS platform. Exchanges use it for liquidity sourcing, and market makers benefit from it by tracking and arbitraging their position in multiple exchanges.
The conventional OMS contains information about order type, size, limit, order instructions, and order transmission.
Technology Behind OMS
Order Management Systems use the Financial Information eXchange (FIX) protocol, and Application Programming Interface (API) or Websocket to generate real-time exchange information and enable rapid, simultaneous execution of trade. Over the years, this algorithmic trading software has incorporated cutting edge features such as comprehensive analytics, real-time trading, and research snapshots, and capabilities to test financial trading strategies.
Order Management System (OMS) for Crypto Trade
The basic functionalities of crypto trade Order Management Systems are very similar to those serving traditional asset markets. Not only does the system automate crypto trading, but adds niche components like wallets and custody to make it a more crypto-specific software.
A cryptocurrency OMS enables
- Seamless connection to multiple exchanges
- Investors to simultaneously execute trade in leading crypto exchanges
- Real-time charting of cryptocurrencies
- Unified user interface and fast order execution
- Crypto portfolio management
Relevance of Order Management System in Crypto Trading
Institutional and individual traders lack sufficient infrastructure to cope with global cryptocurrency exchanges, and it’s often difficult to source counterparties in the crypto trading system. Also, liquidity positions vary between trading venues. Investors open accounts in multiple exchanges in order to maximize profit; now to collect, calculate and consolidate trade data for each account individually is highly complex, very expensive, and too time-consuming. Cryptocurrency Order Management Services help investors stay connected with many, if not all of their accounts.
As most mainstream OMSs do not offer cryptocurrency Order Management services, crypto entrepreneurs have introduced OMSs which cater solely to the crypto trade business. These systems offer multiple services within the digital asset market realm, like crypto research reports or no-cost wallet services.
What are the pain points addressed by an OMS?
An OMS addresses some of the major challenges that stand in the way of profitability of the cryptocurrency sector, such as –
- Liquidity fragmentation – The price of the same coins are different on different exchanges
- Inconsistent market prices – Too many choices makes it hard to track the best deal
Under these circumstances, institutional investors and hedge funds struggle to make full use of their capacities. An Order Management System for cryptocurrencies coupled with a Cryptocurrency Smart order routing service works toward eliminating these inefficiencies in the sector.
What role does an OMS play for an institutional investor?
Order Management Systems do much more than just managing orders.
Institutional investors have been reaping optimum benefits from their investment through the effective use of OMS platforms. Research suggests institutional investors spend roughly US$ 1.5 to 2 billion a year on the technology; they continuously feel the need to stand by market compliance measures and keep up with the volatile market structure. Robust and customized reportings within an OMS reduces points of failure and streamlines the workflow.
The crypto trading sector is, therefore, more and more dependent on the OMS and adds on to the number of functionalities firms require from their respective order management systems.
Moving forward, OMSs are being integrated with Execution Management Systems to create digital asset Order and Execution Management platforms for a smooth, multi-asset trading interface for crypto markets.
Ionixx strives to build and hand out comprehensive OMS solutions to businesses. Wish to develop a quick and easy OMS? Schedule your appointment with us today!