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May 10, 2006

JP Morgan Reorganization Takes Global Strategy

By Peter Chapman

JP Morgan is restructuring its equities division along global lines. The move is part of a company-wide reorganization of JP Morgan Chase's investment banking unit that breaks the group into four pieces. Equities, fixed income, credit, and commodities and currencies are each to be run by a single global head.

The new structure replaces a regional approach under which senior managers held responsibilities across asset classes. A global approach puts JP Morgan on similar footing with many of its competitors. "Our clients think globally," says Emily Portney, JP Morgan's chief financial officer for global equities, "and so should we."

Portney's boss, and the new head of global equities, is Carlos Hernandez. Until recently, the executive was in charge of origination and distribution of equities and debt securities in North America.

The changes have affected at least two other top execs. Patrik Edsparr oversaw trading of both equities and fixed income securities in North America. He is now global head of rates. John Corrie, in charge of European equities, had his job eliminated.

Other changes are in store for the 1,000-person strong equities group. Hernandez is expected to announce a new managerial line-up that may or may not include a global head of cash equities, say sources.

Now, Scott Harrington is in charge of U.S. sales and sales trading while Jim Brett runs U.S. cash trading. Dan Keegan was in charge of sales trading and co-head of electronic services. He just resigned to take a post at ATD.

The reorganization comes on the heels of a strong year for JP Morgan's equities group. The unit took in $1.8 billion in 2005, a 21 percent increase from 2004. The gain was largely due to increases in commissions, according to the bank, partly offset by lower trading revenues.

In rejecting the regional approach to organizational structure, JP Morgan hopes to create synergies between its worldwide equities trading departments.

That should lead to a more coordinated approach to client coverage and a more rational approach to infrastructure investment, says Portney.

As part of the move, JP Morgan's futures and options brokerage as well as its prime brokerage operations will work in close coordination with cash equities.

That move should have at least two effects, according to Portney. First, it will allow JP Morgan to cater to international exchanges, something deemed beneficial as exchanges move towards trading across asset classes.

Second, the firm believes it can leverage the talent between its equities and derivatives groups. Algorithm developers on the equities side, for example, will be able to help design algorithms on the derivatives side and vice versa, Portney notes.