J.P. Morgan and the Australian Securities Exchange (ASX) have announced that J.P Morgan is the first ASX Over the Counter (OTC) Clearing participant to launch an agency clearing service for Australian (AUD) and New Zealand (NZD) dollar denominated OTC derivatives, having successfully cleared a trade for one of its underlying clients.
J.P. Morgan’s launch underscores its commitment to clearing and the OTC derivatives
market, and capitalises on ASX’s technology investment in the area.
“This investment underlines our commitment to the Australian and New Zealand
marketplace, and the Asian marketplace in general,” said David Martin, Head of Asia
Clearing at J.P. Morgan. “We are pleased that we are able to offer our local and global
clients greater choice and improved operational efficiency in the ever-evolving OTC
derivatives clearing market.
“Clients need a clearing broker whose business model continues to evolve and a
product offering that continues to expand.
“Globally, we are focused on broadening the portfolio of products that we can clear
for our clients, and expanding the list of clearing houses that we can support.
J.P. Morgan’s approach also allows our clients to use the depth of our local Markets
franchise and our ability to make markets at the ASX,” he said.
ASX operates the largest listed interest rate derivatives market in Asia (with annual
notional turnover of $53 trillion) and has a fully developed OTC Clearing service,
which provides global standard API connectivity, 24-hour clearing, AUD and NZD
product coverage, and a fully automated cross-margining facility. ASX has attracted
meaningful market share to its dealer to dealer OTC clearing service, which has been
in operation since 2013, clearing $6.3 trillion in notional value last financial year.
Helen Lofthouse, Executive General Manager Derivatives and OTC Markets at ASX,
said, “ASX operates at the heart of the Australian and New Zealand financial markets
and has invested in capital efficient OTC Clearing infrastructure as a key part of its
broader Rates ecosystem.
“J.P. Morgan’s access to ASX’s OTC Client Clearing service demonstrates its
commitment to providing the best solutions for its clients. It also shows ASX’s
determination to develop services valued by the market, which includes local clearing
that’s open throughout the Australian and New Zealand time zone.”
Among the many advantages of the J.P. Morgan clearing solution is that Australian-
domiciled clients will benefit from being able to keep all of their AUD and NZD cleared derivative trades in one clearing house, operating within a single legal
construct and leveraging local infrastructure.
“Our investment in product development responds to the needs of our domestic
institutional investor clients that can benefit from a local solution,” said David
Stinson, Futures & Options and OTC Clearing at J.P. Morgan.
“J.P. Morgan’s solution offers greater efficiency that will also help clients with their
risk management strategies.
“Clients that are trading AUD and NZD overnight index swaps and interest rate swaps
will be able to take maximum advantage of a local clearing provider open through the
Australian business day, realising both the operational and risk benefits of seeing their
positions updated and refreshed in a local time zone, in local currency.
“In addition, we understand that clients need solutions to optimise the performance of
their cleared portfolios, minimising the amount of margin they have out to the street.
“By supporting the cross-margining facility that ASX offers across its cleared interest
rate derivatives, we are extending this benefit to buy-side clients and allowing them to
access funding and margin efficiencies,” Mr Stinson said.
Allan McGregor, Senior Manager Derivatives and OTC Markets at ASX said,
“ASX’s automated cross-margining facility is already used by banks, including J.P.
Morgan, to generate margin savings through the combined risk management of highly
correlated ASX futures and OTC products.
“This facility is now accessible to buy-side firms and hedge funds, which is
particularly important given the global and domestic roadmap towards mandatory
bilateral margining rules for non-centrally cleared OTC derivatives,” he said.