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February 1, 2013

Going Global

J.P. Morgan Consolidates Multiple Asset Trading Systems into One

By Tom Steinert-threlkeld

JPMorgan Chase's corporate and investment bank has begun to roll out a technical platform designed to consolidate 30 different trading systems into one.

The "first wave of execution" in the J.P. Morgan Markets system puts trading in foreign exchange, rates and commodities onto the platform, said Alex Nacht, managing director of markets strategies at the firm.

Trade research and analytics will also be included in the initial set of services for clients around the world, along with a variety of post-trade services.

"By having a high degree of automation at every stage of a trade, clients will be able to focus on trading ideas, rather than the increasing complexity of a post-regulatory world in trade execution, post-trade clearing, settlement and reporting," said Troy Rohrbaugh, global head of FX and rates trading, announcing the start of the rollout.

J.P. Morgan ranks as the sixth leading global bank in foreign exchange trading, according to the Euromoney 2012 FX Survey, with somewhere between a 6 and 10 percent share of the market. Roughly $4 trillion in currencies changes hands daily, according to the Bank for International Settlements.

The rollout involves a "broad set of functionality," said Nacht, starting with access to information from its existing MorganMarkets research service as well as a market data portal.

The platform's analytical services allow for data queries and creation of charts, across different types of securities; a market monitor; a suite of securitized products and mortgage tools; pre- and post-trade analytics for equities; and pricing and structuring of fixed-income products.

The system will execute trades in interbank cash markets; spot trading, with delivery of one currency for another normally two days after the trade date; forward trading, where delivery is at a future date; swaps, where currency is bought on one day and sold on another date, simultaneously; and nondeliverable forwards, where there is no physical exchange of currencies and a contract is settled in cash, usually dollars.

Customers currently get JPM research from MorganMarkets, trade currencies on MorganDirect and use an option structuring tool on a service called Athena. However, all these portals are being migrated to J.P. Morgan Markets, where a client can do all three on the same site, with one login.

"We have created J.P. Morgan Markets to give clients an intuitive user experience, and a convenient and efficient way to trade across different asset classes, all in one place," said Rohrbaugh.

The rollout of the unified system will help J.P. Morgan more easily report the details of trades to regulators, as required, for instance, by the 2010 Dodd-Frank Wall Street Reform Act.

"In our view, the value proposition is not necessarily an enhanced functionality for a given product," said Scott Wacker, chairman of the steering committee on the J.P. Morgan Markets project. "But it's more the interconnectivity between products and the fact that going forward, with increased regulation, the ability to optimize your activities across products and even your actions within a single product is going to be very important."

In the foreign exchange case, trades involving nondeliverable forwards, for instance, will need to be carried out on "swap execution facilities" and then centrally cleared, as required by Dodd-Frank for certain forms of swaps.