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BNP Asset Management's Pojarliev discusses a variety of options to address foreign currency exposures. Although there is no single best-practice solution for addressing foreign currency exposures, institutional investors have three main choices, he says.

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February 1, 2013

Going Global

By Tom Steinert-threlkeld

Also in this article

  • Going Global
  • J.P. Morgan Consolidates Multiple Asset Trading Systems into One

Forward trades and currency swaps do not have to be carried out on these new facilities. But details of trades have to be reported to regulators. FX options are intended to be carried out on the new venues, but so far the industry has not figured out how to clear physically settled FX options, which is the norm in the over-the-counter market.

And details of spot trades don't have to be reported at all, said Wacker, who also is head of FX sales for Europe, the Middle East and Africa, for the business.

"If you think about that, it's quite complicated," said Wacker.

Which is one of the main reasons J.P. Morgan will be consolidating information and trading capabilities for a wide range of types of securities onto the Markets platform. The system, which uses just one computer language to build and maintain features, will keep track of regulatory requirements and streamline reporting, Wacker said.

"Future waves" being released through 2013 will involve a "broader set of execution capabilities across fixed income," Nacht said.

Equities transactions will not be part of the execution systems in the platform, initially. That's because clients don't typically go onto a single-dealer platform such as this one and trade extensively in stocks, the company said.

But over time, stock trading capabilities will be added. One example is a part of the platform called Nexus, which allows institutions to create "synthetic" portfolios of assets and then buy and sell these portfolios.

Most clients and products will be transferred onto the system by the end of 2013, as well.

"By the end of this year, we will have consolidated more than 30 platforms into one client offering," said Peter Cherasia, global head of markets strategies. "It will enable us to quickly deliver innovative new products as we adapt to changing market conditions."

J.P. Morgan Markets eventually will include all forms of electronic trading services offered by the bank, from front to middle to back office.

With $18 trillion of assets under custody and $393 billion in deposits, the J.P. Morgan corporate and investment bank spends more than $3 billion a year on technology.

In August 2011, the bank transferred more than 1 million accounts onto a new broker-dealer platform, known as Morgan Communications or MORCOM. The online system serves both retail and institutional brokers.

That initiative, as well as a widespread consolidation of systems, was part of a Strategic Re-engineering Program (SRP) that, in effect, got its start with the May 2008 completion of the acquisition of Bear Stearns, the collapsed Wall Street investment bank.

The re-engineering included four main consolidation efforts:

*Derivatives trading platform program: a rationalization of core trading platforms.

*Back-office re-engineering program: improving front-to- back-office systems.

*Derivatives program: Upgrading derivatives clearing operations and achieving "straight-through processing," also in front-to-back systems.

*Critical platforms re-engineering program: Initiatives to lower overall expenses and increase the speed of bringing new services to market.

The combined company didn't need to run two clearance and settlement platforms for stock transactions, for instance. And it certainly didn't need 14 different platforms for trading derivative securities, from futures and options to currency swaps.

J.P. Morgan Markets is a "strategic initiative," said Nacht. But it is not specifically a part of the original re-engineering program.

The unification of research, analytic and trading services "is the next step in the evolution" of J.P. Morgan's investment banks operations, Nacht said, "built on top of the [strategic re-engineering program] foundation."


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