From trade operations to post-trade compliance, what makes or breaks a middle office is the veracity, management and delivery of its data.
A middle office is only as successful as its data. From trade operations to post-trade compliance, performance reporting to position and cash reconciliation, corporate action verification to broker reconciliation, what makes or breaks a middle office is the veracity, management and delivery of its data.
It is no surprise that asset managers are turning to innovative technologies to help them improve data quality, analysis and delivery from the moment a trade is ticketed. Today, technologies like blockchain, artificial intelligence and machine learning are facilitating the aggregation and management of large volumes of external and internal data — including both historical and real-time data — received from back-office platforms for reporting to portfolio managers, finance, risk, compliance, clients, regulators and others. Across this process, these technologies are transforming the middle office.
Using digital technology to automate historically manual middle-office data processes used to be a competitive differentiator. That is no longer the case. Clients are no longer wowed by massive data analysis and real-time reporting. They expect it. Gone are the days when a weekly or monthly spreadsheet report of trades was sufficient. Today, firms that cannot produce transaction information in real-time are at a market disadvantage.
It’s not only clients who are demanding real-time, high-quality data. Regulatory bodies are as well — especially on the global front, where dozens of jurisdictions and agencies present complex compliance requirements. As a result, middle-office managers, their staff and their systems must be adept at repurposing data to be flexible enough to comply with disparate regulations without having to custom-build reporting capabilities.
The technologies driving innovation
If technology is critical, which ones are enhancing quality, management and delivery of data, and driving middle-office innovation? Certainly, blockchain has received a tremendous amount of attention lately. And with good reason: It adds triple-entry efficiency and transparency to ledgering and reporting by creating a detailed, replicable and cloud-based copy of each transaction. But blockchain does have its own set of caveats. Whenever granular data is migrated to the cloud, security, privacy and ownership concerns arise, as well as control issues. When can information be accessed? By whom? When should it be masked? These are complex questions that middle office management may or may not be prepared to answer, and for which many firms are turning to outside experts for assistance.