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The Trading Mesh

Build a Smarter Middle Office

Thu, 12 Oct 2017 08:33:28 GMT           

Few could argue with the notion that having a smarter middle office – where more is automated, the cost of trading goes down, exceptions are dealt with more swiftly and efficiently, and customer service is improved – would be a good thing.
So, on 4th September 2017, The Realization Group, together with Software AG, hosted a round table on how firms can start to build a better middle office.
Making the business case for middle office projects has not always been easy, not least because the cost of trade information and other business case data may reside on multiple systems, or may be difficult to collect and collate. But with regulatory changes acting as a dynamic catalyst for new systems and processes, experts believe the prospects are strong for operations to add value.
Most participants agreed that there is no need to wait for technology to evolve. What is needed is the willpower to push forward, develop user cases to show proof of concept and then build momentum for wider changes.
The technology is there now that can fix pretty much everything we’ve mentioned here. So what is holding firms back? First, they may not know what the obstacles are. A number of participants argued that the culture needs to change. For instance, firms often end up with a proliferation of “day one” solutions because as soon as they finish one, they need to move onto the next. This means there is never the opportunity to take a longer-term perspective. 
At the same time, many said it is crucial to avoid going after massive three-year programmes where after two and a half years nothing has been delivered. In fact, participants said the solution isn’t to build systems that can do everything, but to develop the tools that allow a firm to build specific services. 
One participant, who was involved in building a middle office and is now in the process of integrating multiple systems and groups, said that - on the one hand - there is the priority of being able to automate as much as possible and make it efficient; but equally important is the need to make sure operations are focused on being value-add. To get to that state, firms need to recognise all three elements of operations: systems, processes and people. 
Most agreed that there has been a shift in the front office mindset, which is beginning to see the middle office as a partner. In a world where regulatory costs are high and growth opportunities are compressed, new P&L opportunities have to be found somewhere. The willingness among participants to engage in a more cooperative, innovative way holds promise, another participant added.
The good news is that the workflow tools necessary for middle office change will help companies identify where to start. That means middle office managers can throw small amounts of money at a problem and quickly show that it makes business sense. That in turn means they can gain momentum because they have built trust with the business. It’s amazing, one executive noted, how budget requests start to get accepted once that happens.
A cultural change is coming, and it’s an exciting time to be in technology.