Investment Banking Units
The units in the investment banking are divided in three types based on their trading activities and communication channel with the client base. These units are
- Front Office
- Middle office
- Back Office
Front office is the division of Investment banks which communicates directly with the customers. Basic functions of Front office are
- It captures the trades and entered into the system.
- It receive, amend or cancel orders from its clients over the phone or on the system.
- It also executes the trades which are entered manually or which directly come from exchange.
- Performs necessary selling and marketing of its investment banking services like merger and acquisition, equity research, fund raising etc.
- This division directly interacts with the clients to know their funding requirement and act accordingly.
Middle office is the Trade processing system of the investment banks which provides support to the front office
- It strictly monitors the trades and captures exception if any.
- It validates and does standardization of trade records received from a trade capture system.
- It also captures the profit flows or financial controls.
- It takes care of the settlement part involved in the transactions Trade Matching
- It takes care of all the related risk management activities which are very important for an investment bank after the recent subprime crisis in USA.
- It handles the treasury management, internal control and corporate strategies for the investment banking division.
Back offices provide support to both the front office and middle office of the investment banks. These are not noticeable to the customers; that’s why these are called back office.
- It carries out all the administration/management related activities
- It performs functions like Settlements, Clearance, Record Maintenance, Regulatory compliance with government regulations and accounting.
- It keeps a documentation of company’s sales and purchase transactions and updates the inventory (i.e. Database) as required.
- It validates the trading data
- It provides all the necessary trading information to the middle and front office periodically.