JPMorgan Worldwide Securities Services ( JPMorgan WSS) aims to shift Australian clients on to its global fund accounting platform by the end of next year, potentially meaning it will no longer require DST Global Solutions’ HiPortfolio system. JPMorgan WSS is now two years into the three-year ‘Project Union’, which is creating a fullyintegrated global platform for investment accounting and fund accounting. The global CEO of the business, Conrad Kozak, admits it was tricky to incorporate Australia’s idiosyncratic tax rules into a global platform, but is confident this could be done by the end of next year. Meanwhile India has become the seventh market in which JPMorgan WSS performs its own sub-custody (that is, the safekeeping and settlement of local assets).
Kozak says the flows of Indian assets are sufficient to justify the insourcing of sub-custody, which will involve the employment of 50-100 people. Apart from the settlement and safekeeping of Indian assets owned by global investors, JPMorgan has an investment bank in India, as well as American Depository Receipt and fund accounting businesses. Kozak says that in the prevailing risk-averse environment, JPMorgan had developed a natural preference for insourcing functions where it made sense, and added that Indian regulations had played a part in the bank’s decision to become its own sub-custodian. “There are very specific rules about what you can do with the cash.
It had to be held with the sub-custodian for a significant period of time, so a lot of the value of the overall custody relationship was locked into the sub-custodian,” he said. “They could charge us nothing and still be making too much money.” The other markets in which JPMorgan offers sub-custody are Australia, New Zealand, Russia, Taiwan, US and UK. Meanwhile, funds manager and broker-dealer clients of JPMorgan WSS are close to being offered a new collateral management engine, which Kozak says “treats collateral like our clients would like it to be treated, which is as being very fungible”. Kozak says the engine would allow clients to move the same parcel of collateral between different exchanges, so that it could be used for different purposes, for instance securities lending or derivatives trades. The engine will see JPMorgan “face off ” with the exchanges on clients’ behalf, saving clients the need to keep collateral posted at multiple exchanges for “safety’s sake” and limiting the use of their collateral.