What is infrastructure?
Imagine a big football match or a West End play. The star players and performers are the ones everyone’s heard about; the ones in full view of everyone. These are the banks and financial firms of the finance world. But what about everything going on behind the scenes that keeps it all together and running? The training staff and coaches, referees, the TV crews? The back stage staff? An industry won’t move very far or make much money at all if it isn’t supported by a strong infrastructure…so what’s going on in finance industry infrastructure?
Infrastructure offers a plethora of back office roles. There are roughly three main branches for elements of infrastructure in which you could specialise: post trade services, market information and information systems.
First of all, there are post trade services offered by investment banks and clearing houses which play a huge part of the finance industry’s infrastructure – and the workings of investment banking particularly. In a nutshell, post trade services refers to all of the jobs that have to be done after a transaction agreement has been made. Post trade services roles are generally based in investment banks and clearing houses (private clearers or the Bank of England)
Post trade services include ‘clearing’: ensuring that each party involved in a transaction fulfils their obligations in the contract; namely the transfer of the securities (the assets being traded) and payment for the trade (a period known as ‘settlement’). Professionals from investment banks and institutions known as clearing houses work as financial intermediaries (essentially middlemen) to make sure all obligations are fulfilled correctly and on time.
Clearing and settlement roles keep the world of trading ticking over like a well-oiled machine, with the aim of keeping trades as efficient and transparent (very important in an industry undergoing huge changes in regulation) as possible. Clearing houses also help to minimise risk for parties in a trade by providing these clearing services and sharing out any losses between their clearing members. Buyers and sellers are also required to ‘report’ a trade they make as part of post-trade transparency obligations, and so clearing houses will also help with reporting responsibilities.
The second branch of infrastructure is market information, or ‘information services’ as it’s referred to by some firms. Knowledge is power in banking, business and finance, and the market information branch of the industry’s infrastructure is in place to ensure that companies and banks don’t miss out on any developments at all, whether major or minor, in their target industries and in the financial markets. There are specialist firms which provide bespoke products and online services that channel all of this information and analysis as it happens for companies’ perusal and use in their day-to-day work and overall strategy development. Roles in market information include lots of heavy research, data and statistical analysis and data reporting.
Thirdly, the overall infrastructure of the finance industry of course also incorporates technical infrastructure. Don’t underestimate how reliant modern day business is on multitudes of hardware and software applications! There are in-house roles for companies that focus purely on taking care of these systems; whether it’s data management and client management systems; accounting systems or other financial management information systems, or other technical equipment the offices use on a daily basis (e.g. phones, iPads and desktops). You could work as a technical infrastructure expert here, assessing and integrating these complex systems. Medium sized and large companies will always have a demand for professionals in this field.
Infrastructure roles as mostly available from graduate level, and the salaries can be pretty high. There may not necessarily be as much of the intense pressure and long working hours of the front office in an infrastructure career, but this doesn’t mean to say it isn’t demanding! Whether it’s technical knowledge or the ability to be highly organised and a top communicator to make sure things get done on time, there will always be high demands and deadlines to be met.
Why is infrastructure important?
There are literally trillions of trades made each day, and infrastructure holds it all together and keeps everything moving. What’s more, transparency wherever possible is paramount in today’s finance world, with seismic changes in regulation and risk management. This means that post-trade services are essential!
Areas of infrastructure
Market information – Firms utilise a number of packages to help them analyse the markets they are involved with as quickly as they can and spot potential trends and apply their findings to their strategy development.
Information Systems – Professionals in this field develop, maintain and manage the complex data management systems, hardware and software at the heart of a company.
Post-Trade Services – There are now numerous software packages that support the various stages of ‘post-trade processing’ – the checks that must be carried out after a trade is complete. Infrastructure roles in this area aim to improve operational risk controls and the efficiency of this process. Under this remit there are plenty of back office roles that keep transactions and deals ticking over smoothly.
Investment Banking – It’s all very well shaping and making trades and transactions, but something needs to be in place to make sure all elements of a contract are met crucial that infrastructure is kept running smoothly in the fast-paced world of investment banking. These professionals support the bankers in their goal to make the most lucrative trades possible.
Developing and maintaining a finance firm's technology.
The whirring cogs powering an investment bank.
Helping finance professionals keep on top of market developments, so they can react quickly.
All of the middle office and back office action that happens after a trade has been made.
Regulation and Compliance
Work as an industry watchdog
What Does the FCA Do?
The FCA stands for the Financial Conduct Authority, and they are the UK’s foremost financial regulatory body, operating independently of the Government.