Large financial services firms are sprawling operations. The front office interfaces with clients on trades and investment strategy; the middle office typically covers risk management, compliance and technology; the back office provides administrative support via settlement, clearing, and regulatory reporting.
Given the scope of the business, the speed of today’s electronic markets, and the complexity of reporting to multiple regulatory regimes, optimization of internal communication is critical. And firms are increasingly realizing that e-mail doesn’t cut the mustard.
Today’s leading-edge communications platforms enable technology and operations collaboration much more seamlessly compared with even the most meticulously managed e-mail inbox, say system developers and market observers. Features can include via persistent chats with history and context; a content system that flags relevant signals and topics of interest; and automated chat bots that reduce manual workloads.
David Weiss, Aite
Historically, communications systems have been reasonably agile and facile in connecting different firms’ front offices, but not so much for the front, middle and back office within the same firm, noted David Weiss, senior analyst at Aite Group. “Front-office chat systems were designed to communicate with their counterparts at other firms, not the downstream folks in the workflows inside their firms,” Weiss said. “Most of the chat platforms the front office is on, the back office is not using.”
Many large firms have Microsoft Lync, now Skype for Business, but front offices haven’t been big users of it and similar enterprise communication systems, Weiss said. Bloomberg is on trading desks everywhere, but the system’s high cost does not lend itself to widespread use in the middle and back offices.
Weiss drew up a hypothetical use case of a dealer-to-client corporate OTC derivatives trade in which confirmation doesn’t immediately show up where it’s supposed to. Without a unifying chat system, the trader would call down to his middle or back office to see what the issue is; the middle/back office would e-mail or call his counterpart at the other firm, who would then reach out to their own front office for clarity. This sequence of events could take an hour or longer, during which the price might move in the wrong direction.
A “special sauce” chat system could solve the problem, Weiss opined. “The idea is for everybody to be on the same platform -- the front office, middle office and back office at both firms all have the special sauce,” he said. “The trade-confirmation problem is solved in five minutes or less, with no yelling. That’s how the new workflow is supposed to happen.”
Inter-firm communications linkages that connect multiple business units are gaining traction, but compliance hurdles have slowed adoption. “Each company has its own private workspace or pod” on a given communications platform, Weiss said. “But compliance now holds the keys to opening up inter-pod links and 'permissioning' people in connected firms to chat with each other. We are in a little bit of limbo, but there is movement.”
Ultimately, intra-firm communication will be driven by the profit-seeking front office, as whether a communications platform establishes itself on the precious desktop real estate depends on whether it can grab traders‘ interest, achieve network effect across firms, and convince them that it can make them money, or save money by avoiding compliance and regulatory issues. “Have I got your attention now?” Weiss said, channeling Alec Baldwin in the 1992 sales tour de force Glengarry Glen Ross.
