Baton Systems, a provider of distributed ledger technology (DLT)–based post-trade solutions for capital markets, and JP Morgan have developed a solution that enables near real-time cash and collateral transfers to multiple clearing houses.
The new service addresses the challenge of having to tie-up excess funds across the clearing workflow by integrating settlement instructions for custodians and other funding sources into existing optimisation and treasury systems without the need to dismantle technology infrastructures.
By integrating with JP Morgan’s internal proprietary system to automate and synchronise existing business processes, the solution eliminates the need to coordinate multiple systems, reports, and spreadsheets, the firms say. The resulting end-to-end automation of the margining and collateral workflows provides full visibility of the asset flows between JP Morgan and clearing houses, with complete audit trails and real-time notifications. It therefore reduces the need to pre-fund margin payments under the current market infrastructure related to margin settlements, the firms add.
“The technology we have developed reduces the time needed to process the entire collateral workflow from hours to near real-time,” says Anthony Fraser, head of global clearing operations and trading cost management at JP Morgan. “We’re already seeing faster, more efficient payments, reconciliation and reporting for all parties in the collateral lifecycle.”
“Our collaboration with JP Morgan is accelerating the movement of assets,” says Arjun Jayaram, CEO and founder at Baton Systems. “This is a truly ground-breaking solution that removes the need for manual intervention in the collateral process by integrating with financial institutions’ collateral and cash systems, leaving their existing processes and systems in place.”
The new solution also synchronises and accelerates the collateral substitution process associated with two legs of that process (eg, cash vs collateral, currency vs currency, or collateral vs collateral). The technology is now being scaled across global clearing houses and enhanced with new functionality with the potential to facilitate more complex clearing arrangements.