JPMorgan, faced with explosive demand for over-the-counter (OTC) derivatives processing, announced today the launch of a solution designed to help financial institutions handle higher volumes, lower position breaks and reduce credit risk.
JPMorgan, which currently services more than $70 billion in derivatives collateral, is offering the new automated reconciliation technology globally, representing the latest enhancement to its Derivatives Collateral Management (DCM) solution. This technology, which is designed to work in conjunction with TriOptima’s triResolve automated position reconciliation service, increases the efficiency and risk management of trading records.
"The trading volumes of OTC Derivatives are expanding exponentially and our clients need better and better tools to provide security against exposures," said Kelly Mathieson, global head of JPMorgan’s Collateral Management business. "Accuracy and transparency are crucial to the derivatives marketplace," she said, adding, "Investment professionals can no longer afford the risks associated with manual processing."
The amount of collateral in circulation in the marketplace is estimated to be well over $2.1 trillion, according to industry estimates. The amount is expected to increase significantly, as institutional investors continue to use collateral coverage to help reduce the credit risk of dealing with counterparties, Mathieson added.
"Trade life cycle management has proven particularly challenging to the OTC derivatives community, as most firms may not have the infrastructure or expertise to address the need themselves," said Colm Gaughran, global product head for JPMorgan DCM. "The growth in OTC derivatives usage, combined with the ever growing number of participants and instrument types, is creating a strong demand for an automated reconciliation tool. By integrating TriOptima’s automated triResolve service, we can now offer a scaleable reconciliation solution that significantly enhances the dispute resolution process."
This is the latest innovation launched by JPMorgan, widely recognized as an industry leader for being the first to introduce a full-service DCM solution in 2005. The service is available to its global client base, which includes asset managers, pension fund managers, governments, government sponsored agencies, hedge funds, corporates and financial institutions. With TriOptima’s triResolve functionality, JPMorgan DCM clients will receive these additional benefits:
– Automated OTC position reconciliations
– Early warnings for discrepancies, better risk mitigation and greater reconciliation transparency.
– Identification and resolution of booking errors and discrepancies in trade valuations, trade populations, single-sided records, splits and structured trades.
JPMorgan DCM covers many of the post-trade functions of the collateral management value chain such as Credit Support Annex (CSA) management, margin call processing, re-hypothecation, settlement and custody. JPMorgan has been a leader in collateral management (CM) since the firm pioneered tri-party collateral management in 1992. The firm offers a full range of services including: Securities Collateral Management, Derivatives Collateral Management and Cash Collateral Management.