The middle office is a team of employees working in a

financial services Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, accountancy companies, ...

institution. Financial services institutions can be divided into three sections: the front, the middle and the

back office A back office in most corporations is where work that supports ''front office'' work is done. The front office is the "face" of the company and is all the resources of the company that are used to make sales and interact with customers and client ...

. The

front office The front office is the part of a company that comes in contact with clients, such as the marketing, sales, and service departments. The term has more specific meaning in different industries. Types General offices The function of front office ...

is composed of customer-facing employees such as sales personnel. The middle office is made up of the risk managers and the information technology managers who manage risk and maintain the information resources. The back office is composed of the

human resources Human resources (HR) is the set of people who make up the workforce of an organization, business sector, industry, or economy. A narrower concept is human capital, the knowledge and skills which the individuals command. Similar terms includ ...

department, office managers and

customer care Customer service is the assistance and advice provided by a company to those people who buy or use its products or services. Each industry requires different levels of customer service, but in the end, the idea of a well-performed service is that ...

representatives who provide support, administrative and

payment services A payment service provider (PSP) is a third-party company that assists businesses to accept electronic payments, such as credit cards and debit cards payments. PSPs act as intermediaries between those who make payments, i.e. consumers, and those ...

. Generally, the back and middle office involves non-revenue generating operations related to risk management and ensuring proper execution of transactions. Middle_Office

The middle office plays numerous roles in financial services organisations and investment banking. It ensures that deals negotiated during financial transactions are processed, booked and fulfilled. Workers manage global agreements concerning business transactions, risk management, and profit and loss. They ensure that documents are completed according to agreements. The information technology middle office designs software to support trading strategies. It manages contracted software systems such as Reuters 3000 and

Bloomberg Bloomberg may refer to: People * Daniel J. Bloomberg (1905–1984), audio engineer * Georgina Bloomberg (born 1983), professional equestrian * Michael Bloomberg (born 1942), American businessman and founder of Bloomberg L.P.; politician and m ...

for trading. The information technology middle office assists both the back and front offices by monitoring and capturing market and marketing information.

History

The term ''middle office'' dates to 1868 as part of the origin of foreign exchange and

Investment banking Investment banking pertains to certain activities of a financial services company or a corporate division that consist in advisory-based financial transactions on behalf of individuals, corporations, and governments. Traditionally associated with ...

. Gold and silver were the standard measure of the global monetary system. Countries used these two metals when trading with other nations. During this period, the term ''middle office'' was used to refer to those employees working in financial institutions whose primary role was to calculate the profits and losses realised after trading. The meaning changed during the

First World War World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was List of wars and anthropogenic disasters by death toll, one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, ...

, after the introduction of paper money in the international market. The term investment banking originated in America while in Britain this was referred to as

merchant banking A merchant bank is historically a bank dealing in commercial loans and investment. In modern British usage it is the same as an investment bank. Merchant banks were the first modern banks and evolved from medieval merchants who traded in commo ...

. These investment banks enabled

government agencies A government or state agency, sometimes an appointed commission, is a permanent or semi-permanent organization in the machinery of government that is responsible for the oversight and administration of specific functions, such as an administratio ...

and firms to raise money through issuing and selling of securities. These banks acted as intermediaries among trading customers. They advised companies on investments. Later, investment banks organized into front, middle and back offices. Since 2013, with the rise of regulation, more and more

Hedge Funds A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as ...

Asset Management Asset management is a systematic approach to the governance and realization of value from the things that a group or entity is responsible for, over their whole life cycles. It may apply both to tangible assets (physical objects such as buildings ...

companies are outsourcing their middle-office activities in order to share their costs or get access to a specific expertise. Financial software companies such a
Hedgeguard
can provide adapted middle office outsourcing service to answer this rising need.

Process

Their work usually consists of calculating profits and losses through the computer information system. This section of the firm examines deal negotiated by the front office. They inspect deal terms, processing, and how the back office will close the deal. The middle office tracks risk, profits and losses. In some big companies, the middle office has legal support to validate the legality of novel agreements.

References

{{Office types Financial services

History

Process

See also

References