David Kane, head of JPMorgan’s technology and operations centre in Bournemouth in the UK (JPMorgan’s largest such centre globally), told FT Mandate: “The way we envisage the industry evolving is that there will be a relatively small and finite number of large complete end-to-end players in future.”
Mr Kane, a chartered management accountant who joined JPMorgan 20 years ago, says he does not exactly know what the future holds for the middle-sized firms. Some “exciting opportunities” could nevertheless await the relatively small-sized niche players who are “equipped to assist the large asset gatherers to obtain the best possible service on certain evolving products”.
Contending that the term ‘global custody’ is a misnomer today, Mr Kane said: “Through the 1990s, global custody was definitely the key and probably the only product in many regards. Throughout that decade, securities lending became the key product overlay on top of global custody.”
Today, the range of services provided to large asset gatherers has expanded beyond custody and lending to include fund accounting, middle office administration, alternative investments and a wide range of activities supporting clients diverse investment strategies.
“Now we call ourselves ‘Worldwide Securities Services’. And, that’s essentially what we’re really talking about,” added the 48-year-old Scot.
The Bournemouth site employs around 5000 people and spans three different campuses within four miles of each other. Chaseside is the biggest site with 3000 staff, who process securities, cash and provide a range of related services 24/7.
In terms of the securities processing landscape, Mr Kane says that JPMorgan’s operations are increasingly aware that “achieving operating efficiencies and responding to price pressure is an absolute business fundamental.” That said, JPMorgan, which has $13,900bn (€10,603bn) of assets under custody, is relaxed but not complacent about the trend.
“If you’ve got the scale and capacity and an extensive range of products and services, you have to be able to ensure that the portfolio products you deliver are attractively and correctly priced for the market,” said Mr Kane.
While derivatives processing came under the spotlight last year from both the Bank of England and the US Federal Reserve, the Bournemouth location head said: “JPMorgan is developing and ensuring that our customers are very cognisant of the regulatory requirements.” Fundamentally it all centres on information.
Mr Kane explained: “For example, what is the status of your portfolio and the investment… those basic everyday things. Are we fully reconciled with our counterparties in terms of acknowledgements and does everyone agree to the status of the particular investment decision?”
While securities processing is increasingly a game of scale, Mr Kane said that this was “only half the story”. For example, capturing information on capital restructurings and transmitting that to clients is dependent on technology. And, to provide high-volume, high-value, urgent-time frame requirements depends on having stable operating platforms with hardware being globally linked. (JPMorgan has operations in Dallas, Tampa, Bournemouth, Sydney and Hong Kong).
“To be able to be the very best…you definitely need to have the strongest technology applications,” he stated. JPMorgan has invested substantially in their proprietary ‘Views’ platform - touted as offering “bang” up-to-date information.
The people side is a key differentiator. “The equally important half of the equation is the people,” said Mr Kane. “You can only be a leading-edge provider if you have the right people, who understand the market, the customers’ requirements and helping to facilitate the industry’s direction through forums.”
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