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Broker-Dealers
Financial services businesses depend on complex information technology and expertise in design, development and administration of regulated transactions. The basic business framework is complex due to the mathematical nature of finance and its intrinsic complexity, as well as the complexity of applicable compliance requirements.
This complex business and regulatory environment has created a complex ecosystem of outsourcing to customize virtually all levels of operations. Indeed, outsourcing is “pandemic” in financial services and broker-dealers because it enables small firms to tailor information technology and telecommunications operations to the individual marketing, investment and trading strategies.
Broker-dealers serve as financial advisers to investors and execute trades of securities and commodities on exchanges. As investment portfolios diversify, broker-dealers need to enable dealings in investments internationally and continuously. Also, investment bankers, who finance and restructure businesses for financial purposes, need to have a broker-dealer’s license to earn “success fees” for services in connection with the sale of securities to a large number of investors.
Broker-dealers regularly hire outsourcers to assist in key business functions such as
Smaller broker-dealers rely upon larger ones to serve as clearing brokers to assume administration of the financial aspects of trading on exchanges. In essence, the clearing brokers serve as outsourcers for the smaller brokers, who lack the capital and technology investment to administer the execution of trading activity. Clearing brokers support many different types of other broker dealers, including those engaged in institutional investments and capital markets, securities and commodities trading, wealth management, prime brokerage (for hedge funds), fixed income (for bonds and other debt instruments) and international firms seeking a local presence in the clearing broker’s locale.
>self-service to access trade confirmations, statements, tax reporting forms, balances, transaction history, cost basis, tax lots and gain/loss information.
> online cash management services, including check writing, debit card, online bill pay and investment capabilities in one account.
>Monthly Statements.
The industry depends on software, telecom and personal attention. It is no wonder that B-D’s use outsourcing to leverage their own capital for back office and middle office operations.
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