JP Morgan and SunGard collaborate on collateral management system

JP Morgan Chase and SunGard have teamed up to create a collateral management system based on SunGard’s Adaptiv product for over-the-counter derivatives. Aimed at smaller end-users, it will allow existing JP Morgan clients, such as corporate treasurers, insurance companies and hedge funds, to outsource their collateral risk management, clearing and settlement systems.

“Our new OTC derivatives collateral management service will help provide increased efficiencies for our clients,” said Murray Brown, JP Morgan’s head of derivatives collateral management. “We expect particular interest from the buy-side of the OTC derivatives market, where participants seek to outsource the non-core parts of their trading and hedging activities.”

SunGard claims its technology will result in cost savings in systems administration, personnel and IT equipment for JP Morgan, while maximising trading opportunities through the efficient updating of limits.

“This arrangement helps JP Morgan concentrate on providing a world-class derivatives service to its institutional clients,” said Juerg Hunziker, president of SunGard’s Adaptiv unit.

Effective collateral management systems have become increasingly important with the rising use of collateral for OTC derivative transactions. Collateral volumes leapt 18.4% to $1.2 trillion, according to the International Swaps and Derivatives Association’s 2005 survey published in March. The survey also found that 55% of all derivatives transactions were now underpinned by collateral, measured by volume or exposure.