Five months on from the announcement by J.P. Morgan that it would realign its clearing, collateral management and execution services for buy- and sell-side firms across transaction types into a single division called Agency Clearing, Collateral and Execution (ACCE), the integration is now complete, according to Kelly Mathieson, head of Collateral Management within ACCE.
J.P. Morgan created the business to integrate various clearing, collateral management and execution businesses across the firm, which originally had been created to support different transaction types, such as securities, futures and options or OTC derivatives, Mathieson says.
The challenge was that these different businesses, while strong and robust in their own right, had grown up in different parts of the organization, Mathieson tells Global Custodian. The creation of ACCE has allowed J.P. Morgan to organize all of its clearing and collateral management activities under a single management structure and governance model.
Mathieson also revealed that J.P. Morgan is now building a platform that brings its clearing and collateral management services onto a common system, client service model and operating environment, which the firm plans to pilot with select clients in the coming weeks, followed a few months later by a full-scale launch.
The global platform is a true end-to-end, centralized collateral management experience that incorporates margin management, optimization, allocation and reporting, Mathieson says. It is a single, comprehensive view of all transactions that create collateral needs.
Mathieson provides an example of how the client experience will change: Our historical functionality offered clients a single view of the securities transactions that gave rise to collateral needs. But if you also hired us to manage your collateral against derivatives, OTC clearing or futures and options transactions, you would have been able to view information for each of those asset classes but would not have had a consolidated, global, long-box view across asset classes. We will soon launch a single, virtual, global long-box that shows clients their collateral obligations and activity regardless of the initiating transaction.
The expanded agency service is offered beyond assets that are custodied or cleared with J.P. Morgan in what Mathieson calls a custody and clearing agnostic view that helps clients centrally manage their collateral against all counterparties and clearing broker relationships. Mathieson called it a breakthrough moment when J.P. Morgan realized it did not have to hold clients assets in order to deliver a unified, global collateral management service.
Mathieson highlights another key feature being integrated within the new platform: On the securities side, we have some really interesting technology that gives clients the ability to project and simulate what hypothetical portfolios might look like and what type of collateral would be needed to support the corresponding repo or stock loan escrow transactions. On the derivatives side, comparable functionality lets clients see the margin required for their portfolio of centrally cleared derivatives transactions. Our new platform brings those capabilities together with sophisticated algorithms that span all transaction types, whether derivatives, securities or both.
Mathieson says the firm has discussed the new service with dozens and dozens of clients around the globe, and says the feedback has been positive. That single, consolidated view, combined with the ability to see total collateral obligations and receive collateral against one or many portfolios, is very compelling.
She adds: We believe that focusing on real-time, dynamic, intraday margin management, across all obligations and asset types, gives clients the unique ability to centrally manage their collateral. As agent, we help them constantly optimize available collateral against their obligations, call back excess when less margin is needed and redeploy that collateral against new obligations. Optimizing all available assets as collateral helps to minimize the need for and associated cost of collateral transformation.
Senior staff in the ACCE collateral management business also were announced this week in an internal J.P. Morgan memo that was seen by GC.
John Rivett, former Collateral Management Product executive, is becoming global head of Regulatory and Industry Affairs focusing on ACCEs position, input, compliance and response to regulations that affect collateral activities. He will lead ACCE Collateral Managements efforts with regulators and industry organizations.
Mark Trivedi, who most recently was head of Global Custody in the Americas, will become global head of Collateral Management Product. Trivedi previously was COO for Global Clearance and Collateral Management, during which time he led J.P. Morgans development and execution of tri-party repo reforms.
Michael Albanese will continue to oversee U.S. Clearing & Tri-Party Repo as part of the Collateral Management organization. He also will continue to manage Securities Clearance, now part of the ACCE Clearing business, jointly managed by Dave Olsen and Nick Forgan.
Richard Turner will lead the Collateral Management product development agenda under Sarah Gill, who heads the Platform team.
Christopher Gohlke