Why the right middle office systems are critical for accuracy in the front office.
The role of the middle office has come to the fore in recent years, with emphasis placed on its ability to provide accurate and timely data to a widening variety of stakeholders, both within and outside the firm.
The original stakeholder is the front office. Without access to middle office data and analysis, the front office runs blinkered and has to rely on disparate data silos and processes.
The front office may be one of the most demanding middle office clients and as a key component of business critical operations, it needs the right information, at the right time, shown in the right way to be of value.
Making performance gains
The more information the front office has about its positions, and the potential impact of events on those positions, the greater the potential performance gains it may be able to make through informed decision-making. Historically, front offices have sometimes gone to market to find their own solutions for performance and risk analysis because of preferences on analytical models or because middle office analysis simply doesn't arrive in time to be of value for investment decision-making.
For the front office, legacy middle office month-end processing is simply not quick enough. They need in-depth analysis in the form of daily data to improve performance and steer the portfolio away from potential hazards.
Creating a full and accurate picture
As mentioned, some front offices have turned away from the middle office, opting to install their own systems that pull in data from various internal and external sources. This fragmented data is patched together, in the best possible way, in order to create unofficial performance and risk analysis. This inaccurate and inefficient way of doing things also means the front office’s analysis may not reconcile very accurately with official middle office data.
A middle office that can share the Performance Book of Record (PBOR) from a single system with controlled, reconciled, and timely analysis to the front office helps simplify many processes and reduce operational risk. The front office can get the independant analysis they need, and the middle office can make sure the data is correct and available to the right people.
This doesn’t have to be a two-step process anymore, with the front office running their own toolset on a daily basis then catching up with official data each month. Debates over data sources, models and analysis results can finally come to an end when both the front and middle office are working from the same data set and platform for both performance and risk analytics.
Sharing the PBOR relies heavily on the middle office having the right system and processes in place to share the required analysis to the front office in an automated, controlled, and timely fashion. By providing the middle office with the right system, the asset manager can drive front office performance and increase collaboration between two important teams.
- Without access to middle office data and analysis, the front office runs blinkered and has to rely on disparate data silos and processes.
- Extending a single Performance Book of Record (PBOR) to the front office makes practical sense, simplifies the process, and reduces operational risk.
- Sharing the PBOR gives the front office eyes — it can see official daily positions and thus make timely and accurate investment decisions.
- But sharing relies heavily on the middle office having the right system and processes that are able to feed analysis to the front office in an automated, controlled, accurate, and timely fashion.