J.P. Morgan has bolstered its collateral management offering by giving clients the option to deposit excess collateral in a separate entity.
The bank’s clients can now use JPMorgan Chase Bank, the depository institution owned by the firm, to lodge surplus collateral from both listed and OTC derivatives activity.
According to J.P. Morgan, the additional service will enhance customer’s security and control over their excess collateral and have on-demand reporting and access to their accounts. The new functionality also centralises the movement of collateral, allowing the buy-side to reduce the reconciliation burden when meeting collateral calls from their clearing brokers.
The need to manage collateral more effectively is a key consideration for buy-and sell-side firms in light of new OTC derivatives rules that will be introduced in Europe and the US from the start of next year. The new rules will lead to the central clearing of many swaps that are currently traded bilaterally.
Industry observers predict the new rules will require swaps market participants to find an extra US$2 trillion worth of collateral.
“In addition to greater transparency and operational efficiency, this product enhancement also is designed to provide clients with increased confidence in how their collateral is managed,” said Emily Portney, head of Agency Clearing, Collateral and Execution (ACCE) at J.P. Morgan.
The bank’s ACCE business offers agency clearing, collateral management and execution services for J.P Morgan’s corporate and investment banking clients.