Back offices struggling with volumes - Acuiti

Back offices are creaking under the strain of extreme trading volumes linked to the coronavirus pandemic, new research has said.

The latest report from intelligence firm Acuiti said that nearly three fifths (58%) of respondents from banks or brokers had reported “major issues” with their back offices and risk management functions.

The research blamed the record trading volumes seen in March, which led the world’s top derivatives markets to report unprecedented monthly volumes.

Respondents to the Acuiti survey said the higher volumes had boosted March revenue for the second consecutive month, with almost four fifths (78%) citing higher year-on-year earnings last month.

Yet some 14% of respondents said they had seen significantly lower revenue due to “trading losses and operational challenges from the shift to working from home”.

Will Mitting, managing director and founder of Acuiti, said in a statement on Thursday: “Higher volumes are leading to increased revenues for many in the market. However, as well as the great concern over the wellbeing of employees in the here and now, we are picking up growing concerns about what comes next in this crisis with the potential return to central bank domination of markets and long-term low interest rates.”

The uncertainty over the short-to-medium term was reflected in the Acuiti Derivatives Sentiment Index, which fell last month to its lowest levels since the index launched in April 2019.

Last month, just 28% of respondents expected higher revenues over the next three months while 18% predicted significant declines in earnings.

With regard to the COVID-19 pandemic, Acuiti said the impact on staff was the major concern for most firms. Acuiti’s 550 respondents are also worried about the solvency of end-clients, such as proprietary trading firms, and their ability to satisfy higher margin calls.

ABN Amro Clearing said in late March it had lost $200 million after it decided to close-out the positions of a client that “failed to meet the minimum risk and margin requirements following extreme stress and dislocations in US markets”.

Chicago-based prop trading firm Ronin Capital went bust at the end of March after it failed to meet a margin call.