J.P. Morgan Offloads Third-Party Broker-Dealer Clearing Business

J.P. Morgan will exit the third-party broker-dealer clearing and custody business by striking a deal with National Financial Services, a subsidiary of Fidelity. The move is the latest from the investment bank as it looks to focus on its core businesses in the face of falling revenues.
By Joe Parsons(2147488729)
J.P. Morgan will exit the third-party broker-dealer clearing and custody business by striking a deal with National Financial Services, a subsidiary of Fidelity. The move is the latest from the investment bank as it looks to focus on its core businesses in the face of falling revenues.

The bank said it had chosen National Financial as the ‘preferred clearing provider’ for clients of its broker-dealer services (BDS) business.

The acquisition will also see J.P. Morgan’s Joe Triarsi, current head of the BDS unit, joining Fidelity’s senior leadership team and once the transition is complete.

“National Financial has been growing its clearing business thoughtfully and this agreement provides us with an opportunity to continue on that strategic path,” says Sanjiv Mirchandani, president, National Financial.

The move will make National Financial the second largest clearing firm for broker dealers, one behind Pershing, a subsidiary of BNY Mellon. Terms of the deal, however, were not disclosed.

The BDS unit provides clearing and middle office services primarily to small- and medium-sized U.S. broker dealers. J.P. Morgan acquired the unit in 2008 following the collapse and absorption of Bear Stearns.

J.P. Morgan said in a statement the decision to offload the third-party broker dealer clearing unit comes after a strategic review that deemed it to be not a core business.

“This decision is consistent with J.P. Morgan’s strategy of focusing on core businesses and strategic growth opportunities,” the bank states.

“J.P. Morgan remains firmly committed to its… prime brokerage, fed clearing & tri-party repo, GlobeClear, collateral management and custody businesses, which are not impacted by this arrangement.”

The exit from the business is latest as the bank continues to restructure its operations in the face declining profits and regulatory penalties. In October, J.P. Morgan completed the sale of its physical commodities business to Swiss trading house Mercuria for $800 million.

However J.P. Morgan stated it intends to continue to self-clear for its own-broker dealers, including the firm’s Asset Management, Chase and Private Banking clients. It said in a release it “remains fully committed to its agency clearing and prime brokerage businesses. The agreement will not have a material impact on the earnings of J.P. Morgan Chase.”

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