JPMorgan WSS Poll Shows Asset Managers, Investors Concerned About Lack Of Market Data For Derivatives
Sydney, 10 October, 2006 – Asset managers and institutional investors perceive the lack of market data, including volatilities, and pricing to be the biggest obstacle to processing OTC derivatives, according to a poll conducted by JPMorgan Worldwide Securities Services (JPMorgan WSS).
The poll was of 20 asset managers and institutional investors who attended JPMorgan WSS’ “Operational Success in OTC Derivatives” forums in New York and London.
Of the attendees, 85 per cent said data issues were the biggest obstacle to processing OTC derivatives; 75 per cent said the functionality of their systems is the biggest infrastructural challenge they face; 65 per cent cited lack of necessary skills and knowledge, as well as recruitment issues to be the biggest people-related challenges they face.
Kirit Bhatia, Global Head of Securities Collateral Management at JPMorgan, said, “While asset managers and institutional investors are increasingly using OTC derivatives for a variety of investment reasons, many are not equipped for the associated processing challenges. The snapshot provided by these poll results supports what we are hearing through our ongoing dialogue with our wider client base and the market, through which we seek to ensure we remain aligned with our clients’ strategies and market evolution.”
A majority of respondents said that their current infrastructure provided limited and insufficient support for the pricing and processing of derivatives. Pricing was the most popular function that respondents would consider outsourcing, with industry standard models and market data the most important factor in selecting a pricing service.
When asked about derivatives collateral management, 45 per cent reported that their current infrastructure only supports the activity to a limited extent. Asked which assets they most commonly use as collateral against derivatives transactions, 88 per cent of respondents said they use debt securities and cash.
According to the poll, the biggest reported driver for the outsourcing of any function is the potential for cost savings.
JPMorgan WSS is seeing a significant growth in the use of derivatives by its current client base. Of the clients served by its Global Derivatives Services business, which provides pricing, transaction management and accounting services, the number of open positions increased by 103 per cent between 2005 and 2006. During the same period, for clients of JPMorgan’s OTC derivative collateral management service, CommanD, the number of CSAs executed increased by 144 per cent.
Within JPMorgan WSS, the other product divisions that support the use of alternative assets include Hedge Fund Services, Private Equity Fund Services and Leveraged Loan Services.
About JPMorgan Worldwide Securities Services
JPMorgan Worldwide Securities Services, a division of JPMorgan Chase Bank, N.A., is the global industry leader with $11.5 trillion in assets under custody. JPMorgan provides innovative securities services as well as clearance and trust services to the world’s largest institutional investors and debt and equity issuers. For more information, please visit www.jpmorgan.com/wss.
About JPMorgan Chase & Co.
JPMorgan Chase & Co. (NYSE: JPM) is a leading global financial services firm with assets of $1.3 trillion and operations in more than 50 countries. The firm is a leader in investment banking, financial services for consumers, small business and commercial banking, financial transaction processing, asset and wealth management, and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase serves millions of consumers in the United States and many of the world’s most prominent corporate, institutional and government clients under its JPMorgan and Chase brands. Information about the firm is available at www.jpmorganchase.com.
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