Middle Office
Candlefocus EditorEssentially, the middle office is the engine room of a financial firm. Although it encompasses a number of functions, broadly speaking, the middle office is responsible for verifying and reconciling the data put forward by the front office, monitoring compliance with laws and regulations, and helping to ensure operational risk is managed effectively.
The middle office serves as the gatekeeper for a financial firm, providing due diligence and oversight for both institutional clients and the firm itself. Specific responsibilities of the middle office include:
•Trade processing – confirming deals and preparing payments.
•Business continuity planning – helping to create plans for risk management.
•Reporting – providing regular, comprehensive updates on risk, finance, operations, legal, and regulatory issues.
•Asset services – monitoring incident reports and tracking custody activity.
•Research – researching global markets, products, trends, and regulations.
•Risk management – monitoring and ensuring compliance and managing risk.
•Compliance – ensuring the firm follows all relevant laws and regulations.
•Technology – monitoring technology, ensuring IT systems are secure and data is up to date.
•Information security – protecting confidential data and confidential client information and ensuring compliance with data protection regulations.
The middle office has become even more important in recent years, as cyber security and other risks have become increasingly crucial. The U.S. Department of the Treasury recently considered tightening regulations requiring middle-office staff to be trained in cyber security, for example.
The middle office is the lifeblood of a financial firm, responsible for controlling market and credit risks, safeguarding information technology systems and making sure the firm adheres to legal and regulatory requirements. This department plays a vital role in the success of a financial firm and crucially, the safety of its customers.