JP Morgan offers clients collateral service

JP Morgan Chase has developed a collateral management service called JP Morgan CommanD.

CommanD handles collateral custody, and also covers a number of post-trade functions including over-the-counter derivatives valuation, reconciliation, credit support annex management and liquidity management, the bank said.

JP Morgan has aimed the product at institutions that want to increase their presence in the OTC derivatives market but are deterred by the expense and difficulty of setting up their own in-house collateral management procedures. These include corporate clients, small and medium-sized investment banks, governments and hedge funds, the bank said.

"Collateral is well understood as a means of reducing credit exposure, but for many financial institutions managing collateral is costly and proves a drain on resources," said Murray Brown, head of derivatives collateral management for JPMorgan Worldwide Securities Services in New York. "JP Morgan CommanD was developed as an agency solution to help clients more effectively handle the collateral process as they continue to grow their OTC derivatives book."

CommanD enters a busy market: Algo Collateral from the Canadian company Algorithmics has more than 60 institutions as users, while SunGard, Lombard and others have also moved to supply the growing demand for collateral management systems. The International Swaps and Derivatives Association estimates that the amount of collateral in circulation grows at an average of 43% each year.