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Crossing the Chasm

Looks like the back office is getting a lot more respect these days. Gone are the days when operations staffers were tucked away crunching numbers, coming up with daily net asset values and filing through endless piles of paper. OK, maybe that's not complete history, but one thing is clear, the importance placed on the back office is increasing with T+1 looming and value-added services becoming a necessity. Just as more value is being placed on the in-house operations department, the demands on clearing firms are also escalating.

Clearing firms, often an extension of a broker-dealers' back office, have been stealthily crossing the chasm and offering what seem to be middle- and front-office services as added value to their clients. It started with helping smaller broker-dealers create Web sites about five years ago and has progressed to where they are now offering everything from online trading and order entry, transfers of assets, tracking and handling retirement distributions.

Clearing firms are trying to understand workflow for their clients and move more deeply into the middle and front offices of their correspondents (see "Clearing Firms Move Web Front Ends into Middle and Back Office"). In that story, Pat Jancsy, marketing & product management vice president of Fidelity Investments Institutional Brokerage Group (FIIBG), says "bringing front, middle- and back-office services to (clearing) correspondents is going to differentiate us."

In "Clearing Houses: Diversify of Die," the same theme rings loud and clear. Derivatives clearing houses "are now under more pressure than ever to search for new sources of revenue. Moreover, to retain their existing clients, they are expected to continuously expand and improve their technology and services."

Certainly demand for added services in the back, middle and front offices are at a premium at a time when automating processes is essential and may even prove to be the key to a firm's success. As a result, clearing firms-whether they are clearing arms of broker-dealers or exchanges-see the demand for straight-through processing as an opportunity. Particularly in this tough economy, as senior editor Robert Sales puts it in his piece, "the ability to wear multiple hats while filling the specific needs of different types of customers is integral to success."

Kerry Massaro


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