What is front office, middle office and back office in capital markets/investment bank?

The terms of front office, middle office, and back office refer to three separate but key functions of most large or sophisticated investment or commercial banks, especially in regards to open market activities like buying and selling bonds, options, or other securities.

Front office is the actual trading floor. Here is where the buying and selling takes place and is usually considered a profit center. Traders actively engage in either making trades that hedge a position or making money on a security.

Middle office usually consists of highly adept traders, analysts, and managers who are knowledgeable of trading activities but usually don't engage in market activities themselves. Instead, they evaluate positions, manage risk, and calculate profit and loss and act as knowledgeable 'consultants' to both front office and back office staff.

Back office is a much more general, administrative, and supportive role. Staff in back office handle day-to-day transaction overhead, data-entry, settlement, clearance, records, compliance, and accounting.

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