J.P. Morgan to Exit Part of Its Government Securities Business
22 July 2016 - 8:00AM
Dow Jones News
Thirty clients of J.P. Morgan Chase & Co. are losing access
to the bank's government securities settlements business, the unit
that ensures that the quantities agreed to in trades are physically
exchanged, in the bank's latest re-evaluation of its most
capital-intensive businesses.
The move means the bank will no longer settle Treasury and
agency bonds through its U.S. broker-dealer arm for those 30
clients, which are banks and brokers that use J.P. Morgan as a
third party to settle trades on their behalf. The firm said it
hoped the majority of clients would have a smooth transition, and
that it would complete its exit by the end of 2017.
J.P. Morgan's decision affects only few dozen clients, but is
significant because there are only a handful of large providers in
the business, meaning those clients jettisoned are now under
pressure to find alternatives.
Shifts in the plumbing underlying Wall Street's trading in
government securities are closely watched because they can help
determine how freely financial institutions lend and borrow
trillions of dollars from one another overnight.
"After careful review, we have determined that it [government
securities settlement] is a non-core service, particularly as we
simplify our business and continue to prioritize strategic growth
opportunities," said a spokesman for J.P. Morgan in a
statement.
One of the businesses most caught up in J.P. Morgan's exit is a
type of bond-for-cash exchange called a repurchase agreement, or
repo, between large banks. The bank is not exiting its tri-party
repo service, however, in which a third party facilitates
settlement of the trades.
Write to Katy Burne at katy.burne@wsj.com
(END) Dow Jones Newswires
July 21, 2016 17:45 ET (21:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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