Operations

The role of the back-office is to perform a variety of functions in a timely fashion.
This includes recording transactions, issuing and monitoring confirmations, ensuring
legal documentation for transactions is completed, settling transactions, producing
information for management and control purposes. This information includes
reports of positions against trading and counterparty limits, reports on profitability,
and reports on exceptions.
There has been significant evolution in the competence of staff and the adequacy
of procedures and systems in the back office. Derivatives businesses, like other credit
or securities businesses, give the back-office the principal function of recording,
documenting, and confirming the actions of the dealers. The wide range of volume
and complexity that exists among dealers and end-users has led to a range of
acceptable solutions
The long timescales between the trade date and the settlement date, which is a
feature of some products, means that errors not detected by the confirmation process
may not be discovered for some time. While it is necessary to ensure that the systems
are adequate for the organization’s volume and the complexity of derivatives activities,
there can be no single prescriptive solution to the management challenges that
derivatives pose to the back office. This reflects the diversity in activity between
different market participants.