New research highlights the benefits of automating the middle-office

Highlighting the pain operational pain points at sell-side firms, a new report outlines the benefits that can result from strategic investment in middle office automation.

By Jonathan Watkins

A new report on the benefits of automating the middle-office has highlighted how firms can offer better client service, reduce settlement fails and eliminate some of the headcount needed to support manual processes. 

Torstone Technology and Firebrand Research published the whitepaper highlighting the need for sell-side firms to re-evaluate their current processes and invest in the middleoffice in order to improve operational controls, reduce risk and support regulatory compliance.

Among the current pain points of middleoffice operations, the paper points out the pressure on staff to support multiple, fragmented processes tied to asset class siloes in the frontoffice which can limit operational oversight. It adds in higher settlement risk, challenges in meeting multiple market structure changes in a timely manner and the inability to quickly respond to client requests due to lack of transparency across asset class specific systems, as other drawbacks to a highly manual process. 

The touted benefits of investing in better middleoffice support, the report says, can be achieved if an organisation has a good handle on its current costs and processes. 

Outside of direct line items such as staffing or regulatory fines, it can be challenging for firms to understand the true cost of settlement failures for example or lost business as a result of poor client experience,” the report said. The traditional industry fixation on post-trade costs to the exclusion of other factors is therefore relatively unhelpful for teams seeking business buy-in and support for middle office investment. 

The multiple benefits highlighted in the report include better client service through more comprehensive and timelier analysis of their activities across asset classes; faster time to market to support new instrumentsand greater operational resilience. 

In addition, the report noted that automation also enables the ability to change front-office systems more easily 

There is currently an industry focus on the ability to be more agile in technology choices and to be able and plug and play into different systems. The paper notes that the focus on operational resilience has added to this impetus to be able to respond to third party solution outages by switching more easily to other providers. 

The paper addresses several key themes facing securities services providers at present, such as how to reduce manual processes, reduce onboarding time and meet regulations such as CSDR’s Settlement Discipline Regime. 

“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,” said Virginie O’Shea, CEO and founder of Firebrand Research. As the wider market begins to focus on digital transformation and improving client experience, the middle office also needs to move with the times.