JPMorgan Expands OTC Collateral Management
June 30, 2008
JPMorgan Chase has expanded its collateral management service for over-the-counter derivatives by adding automated reconciliation through the triResolve solution of Stockholm-based TriOptima.
"Trade reconciliation is challenging in the OTC derivatives community as most firms may not have the infrastructure in place themselves," said Colm Gaughran, global product head of JPMorgan's Derivatives Collateral Management (DCM) platform, which launched in 2005. The bank has more than $70 billion in derivatives collateral under management, and its clients include asset managers, pension fund managers, governments and government-sponsored agencies, hedge funds, corporates and financial institutions.
With triResolve, DCM will no longer manually reconcile clients' OTC portfolios with counterparties'. Where that process used to take days for a larger portfolio, it can now be done in a few hours, or even minutes.
"For the purposes of collateral management, JPMorgan extracts the client's OTC derivatives information from its collateral management system electronically and forwards it to TriOptima to match up with that received from a counterparty," Gaughran said. "If the counterparty is a client of TriOptima, the information can be matched automatically through the service. But if it is not, JPMorgan will itself input that information into the triResolve system on behalf of the counterparty."
Introduced in April 2007, TriOptima's reconciliation service allows brokers to submit their portfolios for comparison and view the results, including trade details and valuations, on the triResolve website. Counterparties can research and resolve their differences online-because the service stores previous data submissions and matches, only incremental discrepancies need to be resolved between counterparties.
The International Swaps & Derivatives Association (ISDA) estimates that at least a third of margin call disputes are caused by incorrect trade bookings. Automation allows for more frequent reconciliation, providing more accurate trading records and margin calls.
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