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 (e.g., NASD, OTC)

What is Brokerage Operations?

Once a firm’s trader enters into a securities transaction on behalf of the brokerage firm and/or its clients, the responsibility for the conclusion of that transaction is passed from the Front Office to the Brokerage Operations staff.

The primary functions of Brokerage Operations are:

  • Trade Comparison, Clearance and Settlement
  • Account Maintenance Activities

The Brokerage Operations area is generally divided into the following departments:

Departments - Trade Comparison, Clearance and Settlement

  1. Purchase and Sales
  2. Cashiering
  • Stock Transfer
  • Stock Loan
  • Buy Ins
  • R&D – DTC vs. Physical
  • DVP
  • International Clearing
  • Government Clearing
  1. Stock Record and Operations Control

Departments – Account Maintenance Activities

  1. Margin Department
  2. Dividends Department
  3. Reorg Department
  4. Broker Book – Portfolio Services
  5. Stock Record and Operations Control

Exception Processing

Due to the sheer volume of securities transaction processed each day, Brokerage Firms employ a process known as "Exception Processing". Exception processing utilizes powerful computer systems and applications to systematically identify only those transactions on the firm’s records that were not processed correctly. Exception reports are generated that identify those problem items for the brokerage operations staff member.

Through exception processing, only transactions that are not processed correctly are brought to the attention of the various operations areas. Transactions that are processed correctly do not require

Back Office Relationships

Most Back Office or operations processing scenarios fall into 1 of 2 categories

  1. Self-Clearing
  2. Correspondent Clearing


In the Self-Clearing Back Office scenario the brokerage firm processes all required trade submission, clearance and settlement transactions on its own behalf and for its own account.

Correspondent Clearing

In the Correspondent Clearing Back Office arrangement the brokerage firm contracts the processing of its required trade submission, clearance and settlement transactions to another firm - the 'Clearing Firm' - that processes those required transaction on the brokerage firm's behalf. In a typical Correspondent Clearing relationship, the clearing firm maintains the required accounting books and records for the brokerage firm, and provides certain account maintenance and regulatory reporting on behalf of the brokerage firm.

Service Bureaus

Often, a brokerage firm utilizes the services of a large, data processing firm to facilitate both the processing of the firm's brokerage transactions and the maintenance of the firm's accounting systems and records. Such a processing firm is called a 'Service Bureau' and performs a miriad of tasks for the brokerage firm's that utilize its services.

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