DISTRIBUTED PROCESSING IN BROKERAGE OPERATIONS: A CASE STUDY (COMPUTERS, SECURITIES, BACKOFFICE)

JAMES JOSEPH MURTHA, Pace University

Abstract

This study deals with the applicability of distributed data processing (DDP) in brokerage operations. Securities brokerage is a complex business which has evolved over time, and practices and customs within the industry do not always lend themselves to automation. As trading volumes grow, brokerage firms must expand their processing capacities in order to remain competitive. Many firms within the industry have turned to automation as the key to this expanded processing capacity. This study examines the critical processing requirements of brokerage operations and attempts to relate these requirements to the strengths and weaknesses of distributed data processing. The study is based upon the results of a questionnaire administered to nineteen of the industry's twenty-five largest firms as well as a detailed case study analysis of one firm's back office operations. The portion of the study based upon the questionnaire indicated that with regard to performance or reliability, brokerage firms using distributed processing enjoyed no discernible advantage over firms using central processing. In addition, none of the firms interviewed used a distributed system to perform core daily operations processing such as Customer Bookkeeping or Margin. However, distributed systems were being used to collect and edit data on the input side and distribute data on the output side. The case study portion of the study highlighted the fact that an important appealing characteristic of distributed systems is physical systems segmentation. Further analysis suggested that this type of segmentation could be used effectively in a centralized system thereby reducing the appeal of the distributed approach. Nineteen brokerage operations requirements were distilled from the study. These requirements are discussed in detail and summarized in table form. The table indicates the approach, distributed or centralized, which best addresses each requirement. The centralized approach was favored in fourteen of nineteen requirements. The analyst has concluded that distributed processing has limited usefulness in brokerage back office systems. While offering some advantages in online inquiry applications, DDP is poorly suited to the requirements of brokerage batch processing. The very large firms expressing interest in DDP would be better served by developing centralized but segmented systems as an alternative to geographical distribution or a single serial process.

Subject Area

Computer science

Recommended Citation

MURTHA, JAMES JOSEPH, "DISTRIBUTED PROCESSING IN BROKERAGE OPERATIONS: A CASE STUDY (COMPUTERS, SECURITIES, BACKOFFICE)" (1984). ETD Collection for Pace University. AAI8417916.
https://digitalcommons.pace.edu/dissertations/AAI8417916

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