JP Morgan will provide Taiwan's over-the-counter trading system -- the GreTai Securities Market (GTSM) -- with clearing, settlement and custody services for foreign government bonds.
Banks, broker-dealers and bills companies will initially be able to trade US Treasuries through GTSM, with JP Morgan clearing and settling those trades at the US Federal Reserve and holding the assets under custody. The solution uses UK broker Icap's electronic fixed-income trading platform BrokerTec and the US bank's clearance and collateral-management service, GlobeClear.
"GTSM's initiative is the first of its kind in the Asia-Pacific region," says Shaun Parkes, Asia ex-Japan head of JP Morgan worldwide securities services. "For US Treasuries, for example, financial institutions in Taiwan historically needed to go through their US securities brokers to trade the securities, and in some cases they kept their securities with the brokers."
The new set-up will give financial institutions in Taiwan direct access to and full control over the US Treasuries they trade, and will allow them to either keep the securities under their own segregated custody accounts or use GTSM's custody account with JP Morgan.
The solution also allows Taiwanese institutions to access US Treasuries' bid-offer rates on a real-time basis in their local time zone. JP Morgan will also provide US dollar accounts for institutional investors trading the bonds in Taiwan.
GTSM did not previously have a clearing, settlement and custody bank for foreign government bonds. It now plans to expand the solution to other G7-country Treasuries, but declined to give a timeframe for when that would happen.
Parkes says JP Morgan is working closely with GTSM to support the platform during the transition process, and will be happy to support its clearance, settlement and custody needs for other foreign government bonds.
GlobeClear is JP Morgan's international securities trading platform, offering clients clearing, settlement, collateral management and integrated financing through a single interface. The system provides clearing services for 22 exchanges and more than 60 OTC markets, including in the Asia-Pacific region, but the bank would not say which exchanges and markets are included.
Earlier this month, the bank updated its securities-lending dashboard, allowing customers increased customisation and transparency capabilities.