The future of post-trade outsourcing

Asset managers face greater pressure to reduce costs while managing increasing complexity in the back and middle office. Our white paper takes an in-depth look into how buy-side institutions are transforming their operations through strategic partnerships in an ever greater number of areas.

Companies operating in the financial services sector are facing greater pressure than ever to reduce costs, as they confront growing profitability challenges. Asset managers’ clients are looking to reduce the fees they pay, while brokers on both sides of the Atlantic are facing falls in their revenue from research following the introduction of the EU’s MiFID II directive. This piece of regulation has prompted European managers to cut the amount of broker research they pay for, and to negotiate down the price of research they continue to receive.

At the same time, financial services firms are threatened with growing costs and complexity in the back and middle office. This reflects the sheer amount of data that regulators want them to gather and process, as well as the desire for richer and more accurate information to support their trading and analytics. As a result, companies are increasingly looking for solutions that provide them with more advanced functionality and allow them to scale up without the need for extra headcount.

Our white paper takes an in-depth look into how buy-side institutions are responding to these pressures and transforming their operations by leveraging strategic outsourcing partnerships in an ever greater number of areas.

“In five years’ time, I don’t think the term ‘middle office outsourcing’ as we know it will exist anymore”

Tamryn Gunter, Global Product Manager, Middle Office

Key themes include:

  • Buy-side organisations are turning towards outsourcing providers to help them monitor and manage regulatory requirements – profiting from third-party providers’ huge scale in  software spend, as well as their ample know-how.
  • An increasing sense among buy-side institutions that there is too much data for humans to manage – leaving automation, which can be scaled upwards easily at relatively low cost and applied to future problems, as the only option.
  • A focus among asset managers on outsourcing middle office functions, which in the future is likely to expand to include some front office activities.
  • The growing acceptance of outsourcing providers among regulators in Asia-Pacific.
  • The particular outsourcing requirements of alternative asset managers, including the need for the service provider to understand complex products.
  • The evolution in outsourcing from a tactical approach – outsourcing discrete functions – to a strategic approach, based on outsourcing a cluster of related functions to make the whole system work more efficiently.
  • The need to future-proof operations against increasing regulatory and compliance requirements, and against the technological changes necessary to meet increasing front office demands.