J.P. Morgan says so far it has eliminated more than a third of its intraday credit exposure related to the unwinding of tri-party repos.
Reducing the amount of intraday credit extended by the two major U.S. clearing banks, J.P. Morgan and BNY Mellon, was the central tenet of the Tri-Party Repo Infrastructure Reform Task Force. The task force was established by the Fed to reduce various risks in the roughly $2 trillion tri-party repo market.
J.P. Morgan also now offers a collateral optimization functionality for the U.S. fixed income repo market, which gives dealers new options to adjust their collateral allocation without requiring credit from the clearing bank.
“Once again, we have delivered on our promise to provide clients with innovative tools that achieve market reforms and reduce their operational burden,” says Mark Trivedi, managing director at J.P. Morgan.
The new functionality includes the ability to reoptimize collateral in term repos during the settlement window, additional intraday security-for-security substitution tools and the ability to adjust the clients collateral mix of new repos after the transaction has settled up to 6:30 p.m., J.P. Morgan says.
“Our new infrastructure that supports reoptimization forms the foundation for the rolling settlement and simultaneous exchange modules we will introduce next year,” says Trivedi. The bank says it expects to release the additional capabilities in the second half of 2013.
For more on the various initiatives to reform the tri-party repo market, see Unfinished business, Global Custodian, Spring 2012.
(CG)