Torstone Technology, a SaaS platform for post-trade securities and derivatives processing, and Firebrand Research, a provider of research and advisory services, has published a white paper highlighting the need for sell-side firms to re-evaluate their current processes and invest in the middle office in order to improve operational controls, reduce risk and support regulatory compliance.
The report, titled – ‘The Importance of Automating the Middle Office’ – emphasises a number of pain points experienced by firms across middle office operations which include:
• Pressure on staff to support multiple, fragmented processes tied to asset class siloes in the front office which can limit operational oversight
• Higher settlement risk and related costs as a result of fragmentation and manual processes which are prone to inaccuracy
• Challenges in meeting multiple market structure changes in a timely manner as manual processes face scalability issues
• An inability to quickly respond to client requests due to lack of transparency across asset class specific systems
The report goes on to outline a number of key operational benefits that can result from strategic investment in middle office operations. These include:
• Increased confirmation matching rates, faster exception resolution and reduction in settlement failures which ensure greater operational efficiency
• Reduction in employee headcount needed to support manual processes, allowing more time to focus on value-added tasks such as support for new products and clients
• Reduction in time taken to onboard new clients via a simplified interface for trade
• Better client service, leading to higher satisfaction levels and increased client stickiness
• The ability to seamlessly plug into different front office systems
• Ensuring regulatory compliance, particularly with regulations such as CSDR’s Settlement Discipline Regime.
Brian Collings, CEO, Torstone Technology, says: “The need to invest in automating the middle office has never been more important. Without doubt, firms are operating in an increasingly competitive environment, whilst having to ensure compliance with a multitude of regulations, and continuously needing to adapt to industry-driven market structure changes. By continuing to rely on manual processes, not only will firms be subject to greater operational risks and costs, but they also risk losing clients who are increasingly demanding greater levels of automation in service delivery and business resilience. The time for digital transformation of the middle office is now.”
Virginie O’Shea, CEO & Founder of Firebrand Research, adds: “A lack of efficiency in dealing with all of the required middle office processes that have stemmed from regulatory compliance obligations can result in trade confirmation backlogs and poor client service. As the wider market begins to focus on digital transformation and improving client experience, the middle office also needs to move with the times.”