Introduction
Every trade has its own life cycle. The entire Life Cycle of a trade can be broken down into pre-trade and post-trade events.
Before going into the details of the trading events, let's explain how a trading deal is being struck between two entities.
We know that one of the primary usages of derivative contract is to hedge the risk. 
Let us consider that a company has got a floating rate liability in LIBOR (London Inter Bank Offered Rate) and it wants to 
convert its liability into a fixed rate. 
The feasible option would be to enter into an Interest Rate Swap. 
The company would strike a deal with a bank and enter into a swap where it would pay fixed rate to the bank and receive floating rate. 
The company and the bank would enter into a trade and the trade passes through various stages. 
The various trade events can be categorized into Front Office, Middle Office and Back Office activities which are explained below: -
Front Office: The FO forms the stage where the trade gets initiated. Here, the order gets placed and the entity will price 
the instrument and give the quote to the counterparty. 
If the counterparty agrees to the details of the trade and is willing to enter into the deal, the trade gets executed. 
The trade is then captured in the trading desk usually using a deal capture system. 
The deal capture system validates all the necessary trade economics before assigning a trade reference number. 
Subsequent trade events like amendment, cancellation would refer to the trade with the help of the identifier. 
An acknowledgement is being sent to the counterparty with the trade details who confirms it back.
Middle Office: The important function that MO performs is to do the Limits and Risk Management. 
The Limits are being calculated at a business hierarchy level. 
The usual hierarchy would be at a Portfolio level and subsequently aggregating to a Trader Level, a Desk Level, 
an Entity Level, and finally to a Group Level. 
Validations are being done on the trade captured, and in case of any discrepancy, an exception is being raised.
The Middle Office plays a vital role in the exception management. 
The trade gets enriched by static data like the standard settlement instructions of the counterparty, Custodian details, City holidays, etc.
Such static data details are important for the completion and settlement of the trade. 
The allocation of the trade is done in the MO and finally the trade is being pushed to the BO and the trade goes live.
Back Office: The BO is the back bone of the entire life cycle of the trade. 
The BO mostly deals with the operational activities like record keeping, confirmation, settlement and regulatory reporting. 
In most cases, BO activities are being outsourced to cheaper sources to cut down on costs for the company.