back-office

adjective \ ˈbak-ˈä-fəs , -ˈȯ-fəs \
Updated on: 13 Oct 2017

Definition of back-office

:of or relating to the inner workings of a business or institution :internal
  • back-office operations

First Known Use of back-office

1915


Financial Definition of BACK-OFFICE

back-office

What It Is

In the finance world, a back office processes the day-to-day paperwork and record-keeping associated with trades, confirmations, settlements and other financial transactions.

How It Works

For example, let’s assume you visit your broker in her office at 123 Main Street in Anytown, USA. You chat for a while, then give her instructions to execute three trades in your portfolio.

Your broker executes the trades, and although she does handle some paperwork regarding the trades, the broker’s back office creates and processes most of that paperwork, including the confirmation statements, account records, clearinghouse matters, and proofs of settlement. The back office might also do the accounting for the broker’s team, deal with legal matters as they arise, and communicate with regulators on compliance issues. This back office does not necessarily share the same location with your broker; a back office can be virtually anywhere.

Why It Matters

It’s easy to say that the back office is simply “administrative support” for “the people that matter,” but the truth is back offices are massive, crucial, often-unseen and usually unappreciated segments of the financial services industry. In many ways, they are the sausage factory that does the day-to-day work of the industry; without back offices, the financial industry would not work. Back offices are also responsible for managing the regulatory compliance related to trade execution and account records.



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