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The Future of Middle Offices Under the Microscope

In today's landscape, the middle office is creaking under the strain of constantly increasing requirements. As the user number goes up, firms have traditionally just added more horsepower in the form of CPU, memory, databases and servers, with layers of applications brought in to handle new functions as needed.

Throwing software and hardware at this problem is only buying time, and it's a direct result of firms not having a clear understanding of what this office does and where efficiencies can be found.



A change in focus

Historically, it's the front office that has been the banks' priority. The front office is where the revenue is coming from, so tech budgets are often set to ensure the front-office systems are top of the line. However, putting some focus on the middle office can actually bring bigger benefits than many firms realize. When workflows and processes in this office are mapped, firms can make smarter decisions about operational models and future systems.

Solutions looking for problems

Technology can absolutely improve operations in this vital office, but it's not a matter of finding the right solutions at first; it's about finding the problems that need to be addressed. This is accomplished after you gain a complete understanding of what the processes and workflows in your office are. Once you actually understand those functions, you can look at how they affect the systems currently in place and what changes could be made to increase efficiency in those areas.

Rapid trading cycles are coming

One driver that makes the case to improve this often-overlooked office is the move toward faster trader cycles. In Europe, MiFID II has everyone set to move to a T+1 standard, and the US Securities & Exchange Commission has announced it is going to adopt a T+2 standard. Many firms are already at T+1, but the goal is to get ahead of the trend and ultimately reach T+0 standard systems. Improvements in this overlooked office can help firms reach this goal, and this certainly won't be the first time that regulations have proven to be a catalyst for change.

The future of middle offices

Many experts in the field feel technology is the future for these offices and that tech will substantially change them over time. Firms embracing cutting-edge technology will be essential when it comes to moving forward.

Some types of new tech are already being explored as possibilities for middle offices, such as microservices, which has an architecture that depends on a series of services to provide an application. This allows for more flexibility in system capabilities. While this type of tech has already been embraced in the retail sector, banks have been slow to adopt due to the caution culture that comes with cutting-edge technology.

Your firm will run at its best when all of your offices are streamlined and made to work as efficiently as possible. If you haven't yet explored the possibilities for your middle office, it's never too late to start researching.
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