ISITC Takes on Middle Office Ops

Best known for setting workflow standards for back-office communications between fund managers and custodians, the International Securities Association for Trade Communication (ISITC) is adding the middle office to its agenda this year.

“It’s a significant area of operational risk,” says Jeff Zoller, who has just begun his two-year term as chairman of ISITC and is also vice president of strategy and risk within investment fund manager T. Rowe Price. Zoller who has served six years on ISITC’s board most recently as vice chair, takes over the helm of the association from Jan Ellis Snitzer, vice president of Loomis Sayles in Boston.

An area of great concern to ISITC members, according to Zoller, is how fund managers and broker-dealers tackle their operational responsibilities for processing investments in non-standardized financial instruments, such as over-the-counter derivatives, commodities and hedge funds. “There is still substantial paper-based processing and tweaking of existing technology which can lead to errors and higher costs,” he notes.

Jeff Zoller, Chairman of ISITC

ISITC is looking for participants in a new Middle Office Working Group from the ranks of traditional and hedge fund managers as well as broker-dealers to help devise best practices across post-execution and pre-settlement functions, including trade allocation and trade confirmation. Fund managers and broker-dealers have to make some tough choices on whether they want to either locally or centrally match their trades and standardized workflow procedures will go a long way to easing the operational pain.

With operational risk highest for processing exotic financial instruments, members of the committee must be up to speed on the post-trade work involved with a number of asset classes, not just plain vanilla equities and bonds.  In addition, they will need good project management skills to deliver recommendations quickly.

The new Middle Office Working Group will complement ISITC’s existing working groups on reference data, settlements, corporate actions, derivatives, and reconciliation. Anyone wishing to join the new committee is asked to contact ISITC through its website, www.isitc.org.

Launched in 1991 to address post-trade communications between fund managers and custodians, ISITC has quickly expanded its reach to the broker-dealer community. It now serves over 80 member firms, covering asset management firms, custodians, broker-dealers and financial technology vendors.