2.4 BACK OFFICE
Farthest from our sphere of influence, the back office is involved in accounting operations and settlement. Their responsibilities also include regulatory compliance such as capital allocation, cash management, collateral management and so on. Most of our interaction with them takes place through what are known as accounting entries. They are numbers generated using specific accounting rules in a downstream system from the trade details captured during the booking process. The accounting entries make it possible for the back office to settle the trade.
In a typical in-house trading system, we do not try explicitly to implement the accounting rules generating the accounting entries. The accounting rules are intelligible to only those with a background in accountancy. It is not efficient for quantitative analysts and developers to study and implement them. A far better idea would be to leverage on the existing implementations in vended solutions.
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