The economic crisis has opened up opportunities for innovation in the middle and back office, according to a survey of securities industry executives.

Forty two of the 72 respondents are interested in central clearing for over-the-counter derivatives; risk management; increasing transparency and automation and taking advantage of new regulatory and oversight opportunities, according to a survey conducted by International Securities Association for Institutional Trade Communication, the U.S. trade group specializing in post-trade communications messaging.

Among that list, the top category was innovations to the middle office, the matching of post-trade details between internal applications and with external counterparties and clients. This is an area which typically encompasses risk management, investor and regulatory reporting as well as collateral management and reconciliation.

The second highest category was innovation in  back office functions – those typically related with trade clearing and settlement.

“The survey showed that the challenges of 2009 will continue into this year,” said ISITC in a statement. “Firms remain primarily concerned with operational risk management, followed by reducing costs and increasing efficiency.”

However, there is a greater emphasis on operational risk management this year compared to last. About 41 percent of respondents said they were concerned about operational risk management this year compared to 38 percent last year.

The focus on reducing costs appears to have declined in no small measure due to the improving economy. About 23 percent of respondents are interested in reducing costs compared to 35 percent last year.

Among the new initiatives that will become important: cloud computing and social networking.

While only 21 percent of respondents are currently involved in cloud computing projects; 42 percent feel their firms should become involved. About 30 percent of respondents said that they were involved in social networking projects and 21 percent said their firms should be.

The overwhelming majority – about 67 percent -- of the firms surveyed said their primary business was providing asset management services.

Custody services followed at 38 percent.


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