Middle office outsourcing: from experiment to strategic imperative
The trading lifecycle has typically been divided into separate stages, from the front office researching markets, receiving instructions and executing orders, to the middle office confirming and processing trades, to the back office reconciling accounts and ensuring the books are up to date (not forgetting custodial and clearing services).
With single, domestic markets and straightforward trading processes it was once relatively simple for financial institutions on the buy or sell sides to handle most of these functions under one roof.
However, the internationalisation of financial markets and the communications advances of recent decades have made such an approach unsustainable for an increasing number of firms, many of which have seen margins squeezed since the 2008 global financial crisis. To keep pace with the increasing complexity of regulatory requirements, and greater client and front-office demands for responsiveness and “real time” information, requires either an ever-increasing investment in headcount and technology, or the outsourcing of more post-trade functions to an experienced third party.