O T C D E R I V A T I V E S R E G U L A T I O N : A R E Y O U R E A D Y F O R C E N T R A L C L E A R I N G?

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1 S T R I C T L Y P R I V A T E A N D C O N F I D E N T I A L O T C D E R I V A T I V E S R E G U L A T I O N : A R E Y O U R E A D Y F O R C E N T R A L C L E A R I N G? June 5, 2013

2 Speakers Michael Mykytiw Executive Director, Regulatory Product Solutions, J.P. Morgan Melissa Maxim Vice President, Regulatory Product Solutions, J.P. Morgan Michael oversees the regulatory change program for J.P. Morgan fund services in the U.S. In this role, Michael chairs several regulatory change committee and working groups whose purpose is to deliver a comprehensive governance program over an increasingly complex and changing regulatory change agenda. This program includes a clearing house function for all regulatory change, assessing their impact on J.P. Morgan products and clients, recommending regulatory solutions and delivering key communications both internally and externally on the Regulatory Change profile. Michael has 23 years of financial services experience and holds a Bachelor of Arts degree in Economics from Hamilton College. Melissa manages the regulatory change impacting J.P. Morgan fund services clients and products. In this role, Melissa analyzes new regulations, engages with clients, industry experts and designs complex client solutions. Melissa has 15 years of financial services experience primarily in fund accounting. In previous roles, Melissa was a Senior Business Analyst responsible for changes to the accounting platform and a Manager of the new business conversion team. Melissa holds a Bachelor of Arts degree in Economics from Smith College in Northampton, Massachusetts.

3 Questions Please submit your questions to at any time during the presentation. You may also contact the speakers directly. Their contact information is below. Michael Mykytiw Executive Director, Regulatory Product Solutions, J.P. Morgan Melissa Maxim Vice President, Regulatory Product Solutions, J.P. Morgan Tel: Tel:

4 Agenda Page Introduction: Purpose and Attendees 1 Central Clearing Landscape Regulatory Calendar 8 J.P. Morgan Implementation Approach 10 Plan Sponsor Considerations 16 EMIR Overview 18 1

5 Agenda Page Introduction: Purpose and Attendees 1 Central Clearing Landscape Regulatory Calendar 8 J.P. Morgan Implementation Approach 10 Plan Sponsor Considerations 16 EMIR Overview 18 2

6 Cleared OTC Derivatives Key Provisions and Timeline What Dodd Frank Title VII of the Dodd-Frank Act provides for the bi-jurisdictional regulatory oversight of the OTC derivatives markets by the SEC and the CFTC. Title VII requires : Mandatory clearing of all swaps accepted by a clearing entity and designated by CFTC and SEC as clearable Mandatory execution of cleared swaps on a regulated exchange or a swap execution facility (SEF) Mandatory reporting of all swaps to registered swap data repositories (SDRs) Capital and Risk Mitigation Rules Business Conduct Rules Cleared swaps, like Futures, will be subject to initial and variation margin requirements. These will be calculated by the clearing house and reported by the clearing broker. They will, however, retain the traits of a bilateral OTC trade and will have Coupons, Credit Events, Corporate Actions etc. Who and When The first clearing mandate is phased-in as follows: Category 1 Entities : 11 March 2013 This group includes: Swap Dealers, Security Based Swap Dealers, Major Swap Participants, Major Security Based Swap Participants and Active Funds) (Active funds are defined as funds which have no third party sub-accounts and which execute at least 200 trades a month on a 12 month trailing basis) Category 2 Entities : 10 June 2013 This group includes: entities such as commodity pools, private funds that are not Active Funds, mutual funds, entities whose activities are predominantly financial in nature, provided that the entity is not a third-party sub-account Category 3 Entities : 9 September 2013 This group includes: all others, including employee benefit plans identified in paragraphs (3) and (32) of section 3 of the Employee Retirement Income and Security Act of 1974,entities that are third party sub-accounts who transact through asset managers The First CFTC Clearing Mandate The determinations require that swaps in four interest rate swap classes and two credit default swap classes be cleared under section 2(h) of the CEA. Swap Category Interest Rate Swaps Credit Default Swaps Swap Class Fixed-to-Floating; Basis; Forward Rate Agreement; Overnight Agreement North American Untranched CDS Indices; European Untranched CDS Indices Class 3

7 OTC Clearing Concepts and Terms Central clearing is the process in which financial transactions are cleared by a single central counterparty to reduce individual counterparty risk. Each party in the transaction enters into a contract with the central counterparty, so each party does not take on the risk of the other defaulting. In this way, the counterparty is essentially involved in two mutually opposing contracts. Clearing Conceptual Model Investment / Asset Manager (IM) 1A) Trade is SEF executed 3) Affirms, Allocates and Assigns Clearing Broker 1) Trade is voice executed Swap Execution Facility (SEF) Affirmation Platform 1A 2) EB alleges trade Executing Broker SEF: A trading system or platform that enables many participants to execute or trade swaps and facilitates price discovery. (e.g. TradeWeb, MarketAxess, Bloomberg, Creditex). Expected registration by July 2012) Affirmation Platform:- An electronic platform for affirming and allocating the trades and assigning the clearing broker. (e.g. MarkitWire, ICELink, VCON). Also referred to as a middleware platform and routes the trade to the clearing house 4) Matched trades sent 5) Cleared notification sent post validation, credit limit check and acceptance for clearing Executing Broker: The broker who executes the transaction. Previously the OTC counterparty. Clearing House / CCP Clearing Broker Future State Current State Association CCP: The Central Counterparty (CCP) is a financial institution that acts as an intermediary between security market participants. It reduces the amount of counterparty risk market participants are exposed to. For centrally cleared swaps, the Clearing House is the Central Counterparty. (Example: CME, ICE, LCH). The CCP also provides the price for valuation of OTC contracts. Clearing Broker Clearing Broker: A member of the clearing house that acts as a liaison between an investor and a clearing house. A clearing broker helps to ensure that the trade is settled appropriately and the transaction is successful. (e.g. Barclays, Citibank, Credit Suisse, UBS, Morgan Stanley, Deutsche Bank, Goldman Sachs) 4

8 Before Current Bilateral OTC Flows J.P. Morgan Fund Services supports clients by booking, valuing and accounting for OTC positions in their funds Bilateral OTC trading Client / Investment Manager 1) Trade is executed 1a) Trade instructions: csv or FpML Trade booking OTC Counterparty 1) Trade is executed by the Client / Investment Manager with an OTC counterparty 1a) Trade instruction is sent by the Client to JPM via FpML or csv or manual instruction 2) Manager Statements 3) NAV produced Valuation and reconciliations NAV Consolidation 2) On a periodic basis the position is valued and is reconciled to the Manager 3) OTC values and life-cycle events are consolidated into the NAV and reporting produced by JPM Funds Services JPM Fund Services 5

9 After Cleared OTC Flows Global Derivative Services will support clients for their future cleared OTC activity, below is a high level schematic Cleared OTC trading Client / Investment Manager 2a) Manager Statements 1) Trade is executed, and accepted by the CCP 1a) Trade instructions: csv or FpML Trade booking 2b) CCP Values Executing Broker Clearing House 1) Trade is executed by the Client / Investment manager with an executing broker, and accepted for clearing by the CCP 1a) Trade instruction is sent by the Client to JPM via FpML, csv or manual instruction containing additional clearing information 3) NAV produced Valuation and reconciliations NAV Consolidation JPM Fund Services 2a) Clearing Broker position report & margin Clearing Broker 2a) On a periodic basis the position is reconciled to the Manager. A reconciliation against the clearing broker will also be conducted. Additionally, daily margin movements will be sourced from Clearing Broker and entered into the accounting record. 2b) CCP valuations can be sourced and used in the NAV if directed and operational timescales permit. 3) OTC values and life-cycle events are consolidated into the NAV and reporting produced by JPM Funds Services 6

10 Agenda Page Introduction: Purpose and Attendees 1 Central Clearing Landscape Regulatory Calendar 8 J.P. Morgan Implementation Approach 10 Plan Sponsor Considerations 15 EMIR Overview 18 7

11 Q4 Q3 Q2 Q a.pptx OTC Clearing 2013 Regulatory Deadlines February 28 March 11 March 31 March 31 Reporting by Swap Dealers (SD) and Major Swap Participants (MSP) of swaps in the FX, Equities and Commodities asset classes (regulatory reporting and real-time reporting) IRS + CDX: Mandatory Clearing for Category 1 Entities (SDs, MSPs, Active Funds) Quarterly Segregation Notice CEA Sec. 4s(l)(4) Advisors and pool operators who have been claiming exemptions from registration as CTAs and CPOs must either register or file with the NFA an affirmation of entitlement to an exemption by February 28. If such a person (or entity) does not do so, then by March 31, pursuant to an NFA Guidance Notice on the subject, an FCM dealing with such a person will have to put a plan in place to cease transacting business with the person April 1 April 10 April 26 Principal Place of Business criterion goes into effect for business organizations (not collective investment vehicles) for purposes of Cross Border Final Order. This applies even if the organization is not organized under U.S. Law. Further Cross Border rules (both in general and specific to hedge funds and other collective investment vehicles) are expected by the summer. Deadline for all swap counterparties to obtain a legal entity identifier (LEI), known as a CFTC Interim Compliant Identifier or CICI itraxx CDS mandatory clearing for Category 1 Entities (includes Mutual Funds, Private Funds) May 1 External Business Conduct (e.g., ISDA Protocol I) June 10 IRS and CDX: Mandatory clearing for Category 2 Entities July 1 July 1 July 12 July 25 August 19 Swap Trading Relationship (written terms of trading relationship, including CSAs, required) Documentation and Portfolio Reconciliation (applies to swaps not cleared on a DCO; second ISDA Protocol) Reporting by financial entity non-sds/msps of interest and credit swaps (regulatory reporting and real-time reporting) Expiration of relief granted by CFTC under the Cross Border Final Order, including Extra-territoriality related relief and "substituted compliance" relief itraxx CDS mandatory clearing for Category 2 Entities Reporting by financial entity non-sds/msps of FX and other commodity swaps (regulatory reporting and real-time reporting) September 9 IRS and CDX: Mandatory clearing for Category 3 Entities (includes Pension Funds) October 23 itraxx CDS mandatory clearing for Category 3 Entities TBD in 2013 CFTC Swap Execution Facility (SEF) Trading rules finalized May 16. Anticipated first SEF launch in Q4 13 TBD in 2013 SEC rules on margin requirements, SEFs, mandatory clearing, margin requirements on un-cleared swaps 8

12 Agenda Page Introduction: Purpose and Attendees 1 Central Clearing Landscape Regulatory Calendar 8 J.P. Morgan Implementation Approach 10 Plan Sponsor Considerations 16 EMIR Overview 18 9

13 OTC Central Clearing Accounting Model How will cleared swaps appear in the accounting record? Cleared swaps will appear in the accounting record in generally the same way as bilateral swaps Cleared swaps will be held on 1 leg with the upfront fee reflected as realized gain/loss The accounting treatment for upfront fees will not change however the upfront fee will become a component of the variation margin and require reconciliation to the clearing broker statement Cleared swaps will be distinguished from bilateral swaps with a position level flag The clearinghouse associated with the cleared swap will be identified How will interest accruals and payments change from bilateral to central clearing? No change in the accounting for interest accruals and coupon payments. The accounting treatment for interest accruals and coupon payments accruals will not change however they will become a component of the variation margin wire and require reconciliation to the clearing broker statement 10

14 OTC Central Clearing Accounting Model (cont d) How will clearing broker commissions and clearing house fees appear in the accounting record? Clearing broker commissions and clearinghouse fees are new trading expenses in central clearing The commissions and fees will be sourced from the trade ticket or the clearing broker statement The commissions and fees will be processed to the accounting recorded as realized loss How will variation margin and initial margin be reflected in the accounting record? The clearing broker statement will be used as the source for processing the settled variation and initial margin amounts. Margin for cleared swaps will be segregated from margin on futures Variation margin movements for cleared swaps will be made up of many components. Where necessary, the components of variation margin will be processed separately. Variation margin components and net amount will be reconciled back to the clearing broker statement 11

15 Transaction Capture Automation Participant J.P. Morgan Fund Services Investment Manager Plan Sponsor Key Activities Enhanced trade capture to consume the following data points: 1. Identification of Cleared versus Bilateral 2. Clearinghouse 3. Executing and Clearing Broker 4. Clearing Broker Commissions 5. Clearing house Fees 6. New Market Identifiers Provided specifications and samples for automated messaging languages to investment managers Enhanced all relevant systems to capture additional data and identify cleared as a distinct category to bilateral OTC trades Consumed new fields in derivatives processing, fund accounting, and reporting systems Provide transaction instructions to fund administrator and custodian after trade successfully cleared Understand and adopt automated trade instructions recommendations provided by ISITC and SWIFT forums Enhance existing transaction capture methods (manual/automated) with additional fields Provide sample trade messages to J.P. Morgan Fund Services Testing of automation functionality with J.P. Morgan Fund Services Encourage Investment Managers to prioritize automation from the outset with the fund administrator and custodian Industry Engagement J.P. Morgan Fund Services engaged with SWIFT and ISITC industry working groups to upgrade the FpML messages for electronic trade instructions J.P. Morgan Fund Services proposed a business case that was approved and adopted by SWIFT and ISITC 12

16 Clearing Broker Utility Participant J.P. Morgan Fund Services Investment Manager Plan Sponsors Key Activities Created a Clearing Broker Utility to perform the following functions: 1. Map and store cash activity and position data from all clearing brokers into a normalised format 2. Send cash activity transactions from the clearing broker statements to the accounting system 3. Perform OTC clearing positions reconciliations to the clearing broker statements daily 4. Perform cash activity and cash balance reconciliations to the clearing broker statements daily Select Clearing Brokers based on best use of standards and data availability Support industry initiatives around standardization of Clearing Broker data and availability Provide fund administrator with authorization to obtain access to the clearing broker statements Provide fund administrator with initial margin and variation margin settlement preferences Encourage investment managers and their clearing brokers to participate in and adopt ISDA s clearing connectivity standard Industry Engagement J.P. Morgan Fund Services is advocating in ISDA s industry initiative called the Clearing Connectivity Standard. The goal of the initiative is to standardize the format of the clearing broker statements used to transmit OTC clearing information. J.P. Morgan Fund Services is engaged with 12 clearing brokers and encouraging the adoption of the clearing connectivity standard. 13

17 Valuation Participant J.P. Morgan Fund Services Investment Manager Plan Sponsors Key Activities J.P. Morgan Fund Services is developing the architecture to support clearing house prices J.P. Morgan Fund Services is establishing connectivity with CME, ICE and LCH clearing houses to obtain price files for IRS and CDX mandated products Challenges to obtaining and applying the clearing houses prices include: timing of final price files, reliability and data segregation In the interim, J.P. Morgan Fund Services will continue to provide valuations for cleared trades based on the sources used for bilateral trades Provide authorization to clearing houses for 3 rd party access Provide identifiers as part of trade instruction that allow J.P. Morgan Fund Services to identify relevant trades and apply the clearing house unit price to value trades Investment managers should be aware that the clearing house price files contain all investment manager data across service providers Some investment managers have expressed reservation about providing all fund data to 3 rd party administrators Confirm desired valuation approach for their cleared OTC positions Industry Engagement J.P. Morgan Fund Services is advocating with the clearinghouses to offer price files in a format more suitable to the needs of a fund administrator. J.P. Morgan Fund Services is engaged with the industry to stay abreast of when a pricing vendor will start offering the clearinghouse prices. 14

18 Agenda Page Introduction: Purpose and Attendees 1 Central Clearing Landscape Regulatory Calendar 8 J.P. Morgan Implementation Approach 10 Plan Sponsor Considerations 16 EMIR Overview 18 15

19 Plan Sponsor Ongoing Considerations Liquidity (Margin/Collateral Requirements) Business conduct rules Industry developments Clearing House innovation (e.g. cross-margining offerings) Clearing Broker and Collateral Manager service evolution (e.g. collateral optimization; collateral transformation) Complying with new regulatory go-live dates / rules New OTC instruments to be mandated Mandates from other regulators and regions 16

20 Agenda Page Introduction: Purpose and Attendees 1 Central Clearing Landscape Regulatory Calendar 8 J.P. Morgan Implementation Approach 10 Plan Sponsor Considerations 15 EMIR Overview 18 17

21 G20 Commitments and European Union (EU) Response All standardized OTC derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties by end 2012 at latest. OTC derivative contracts should be reported to trade repositories. Non-centrally cleared contracts should be subject to higher capital requirements. (G20 Pittsburgh) European Market Infrastructure Regulation (EMIR) Markets in Financial Instruments Regulation (MiFIR) Capital Requirements Directive (CRD ) IV EU Trading - MiFIR Clearing EMIR Reporting EMIR Capital & Risk Mitigation EMIR/CRD IV US Trading Dodd Frank Clearing Dodd Frank Reporting Dodd Frank Capital & Risk Mitigation Dodd Frank 18

22 EMIR: Implementation Timeline Trilogue compromise (9 Feb) Parliament s initial approval of EMIR (29 Mar) EMIR revised text published (15 Jun) Council jurist linguist meeting (1 Jun) 2012 IOSCO/Basel consultation on bilateral margining (Jul) Parliament and Council adopted EMIR (3/4 Jul) EMIR in force (16 Aug) 1 Recordkeeping obligation EP/Council deadline to object to technical standards (19 Feb) IOSCO/Basel consultation on bilateral margining CCP authorisation/ recognition process Clearing obligation process 4 Bilateral margining obligation (expected phase in from 2015) Phase-in of clearing obligation Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q DPs on technical standards: EMIR (ESMA, 16 Feb) Capital requirements for CCPs (EBA, 6 Mar) Risk mitigation techniques for OTC derivatives not cleared by a CCP (ESMA, EBA and EIOPA, 6 Mar) CPs on technical standards: Capital requirements for CCPs (EBA, 15 Jun) ESMA CP on EMIR (25 Jun) Final draft technical standards: CCP capital requirements (EBA, 26 Sept) ESMA technical standards (27 Sept) EBA Opinion on CCP capital (26 Sept) Adoption of technical standards by Commission (nine RTS/ITS adopted on 19 Dec) ESMA CP on CCP interoperability(20 Dec) Technical standards in force (15 Mar) Confirmation and marking to market/ model obligations Reporting obligation 2 Reconciliation, compression and dispute resolution obligations (15 Sep) Reporting obligation 2 1 EMIR was published in the EU s Official Journal on 27 July and entered into force on 16 August Many provisions will only be effective once Level 2 measures have come into force. 2 The draft technical standards suggest the earliest possible reporting start dates will be1 July 2013 for interest rate and credit derivatives and 1 January 2014 for all other asset classes. ESMA s latest estimate is 23 September 2013 for interest rate and credit derivatives. 3 An EU CCP that has been authorised in its Member State to provide clearing services, or a third country CCP that has been recognised to provide clearing services in a Member State, must apply for authorisation/recognition within six months of adoption of relevant technical standards. EU CCP: competent authority has 30 days to assess if application complete and must decide on authorisation (after risk review and opinion of college) within 6 months of submission of a complete application. Non-EU CCP: ESMA has 30 days to assess if the application is complete and must decide on recognition within 180 working days of submission of a complete application. Also requires Commission decision on equivalence/reciprocity of third country regulatory regime and co-operation agreements with third country competent authorities. 4 ESMA must decide on whether to propose a clearing obligation within six months of notification of authorisation of a CCP to clear a class of OTC derivatives or within six months of deciding on recognition. ESMA may also on its own initiative propose classes of derivatives that should be subject to the clearing obligation for which no CPP has yet received authorisation. 5 According to ESMA s projections, the first clearing obligation should start to apply during the summer of

23 EMIR: Clearing Obligation Highlights of the clearing obligation What must be cleared? Obligation to clear all OTC derivative contracts declared by the European Securities and Markets Authority (ESMA) to be subject to the clearing obligation where they are between relevant counterparties Who will be required to clear? Counterparties subject to the requirement may be financial counterparties, non-financial counterparties or third country entities: Financial counterparties (FC): An investment firm, a credit institution, an insurance undertaking, an assurance undertaking, a reinsurance undertaking, an undertaking for collective investments in transferable securities (UCITS) and its managers, an institution for occupational retirement provision and an alternative investment fund managed by AIFMs (in each case authorised pursuant to relevant EU directives) Non-financial counterparties (NFC+/-): An undertaking established in the EU other than a financial counterparty or a central counterparty Contracts below a clearing threshold will not have to be cleared Commercial and treasury hedging activities will not count towards the clearing threshold Thresholds and hedging definition set out in technical standards Third country entities are subject to the clearing obligation where the contract is: between a financial counterparty or a non-financial counterparty (exceeding the clearing threshold) and a third country entity that would be subject to the clearing obligation if it were established in the EU; or between two third country entities that would be subject to the clearing obligation if they were established in the EU provided the contract has a direct, substantial or foreseeable effect within the EU or where such obligation is necessary or appropriate to prevent evasion of the Regulation 20

24 E M I R O V E R V I E W a.pptx EMIR: Clearing Obligation (cont d) Highlights of the clearing obligation Are there any exemptions? Exemptions from the clearing obligation apply to non-financial counterparties below a clearing threshold, pension funds and certain central banks and public bodies involved in the management of public debt Pension funds temporary exemption: A three year exemption from the clearing obligation applies to pension scheme arrangements (as defined in EMIR) in respect of transactions that reduce investment risks directly relating to the financial solvency of the arrangements Exemption will also apply to institutions providing compensation to members of pension schemes in case of a default Note that collateral requirements for non-cleared transactions will apply Which derivatives will be subject to the clearing obligation? EMIR covers all segments of the OTC derivatives markets, including foreign exchange, interest rates, credit, equity and commodities Top-down and Bottom-up approach 21

25 EMIR: Reporting Obligation Highlights of the reporting obligation What must be reported? Detailed information for all derivative contracts (OTC and ETD) (split into counterparty data and common data) The Regulatory Technical Standards (RTS) and Implementation Technical Standards (ITS) contain detailed requirements on format, identification of counterparties, identification of derivatives, reporting of collateral and reporting start dates Which contracts will be subject to the reporting obligation? The obligation applies in respect of derivative contracts (whether cleared or non-cleared) entered into: prior to the entry into force of EMIR if they are outstanding at the date it enters into force; and after the entry into force of EMIR There are phase-in provisions for contracts entered into before the reporting obligation applies To whom and by when must the report be made? The report must be made to a trade repository or, where one is not available to record the details, to ESMA The report must be made no later than the working day following the conclusion, modification or termination of the contract 22

26 EMIR: Risk Mitigation Risk mitigation for non-cleared derivatives What are the risk mitigation requirements for non-cleared derivatives? All FCs and NFCs (regardless of whether or not the clearing threshold has been reached) that enter into a non-cleared OTC derivative contract must put in place arrangements to measure, monitor and mitigate operational risk and counterparty credit risk, including: timely confirmations of contract terms (by electronic means where available); and formalised, robust, resilient and auditable processes to reconcile portfolios, manage associated risks, identify disputes early and resolve them and monitor value of outstanding contracts FCs and NFCs exceeding the clearing thresholds must mark-to-market (or model where market conditions prevent markingto-market) the value of outstanding contracts on a daily basis FCs and NFCs exceeding the clearing thresholds must require timely, accurate and appropriate segregated exchange of collateral FCs must hold capital to manage risk not covered by exchange of collateral The RTS include further details in respect of the requirements for timely confirmations, reconciliation, portfolio compression, dispute resolution, marking-to-market and marking-to-model 23

27 EMIR: Other Provisions CCPs and trade repositories EMIR contains common rules for central counterparties and trade repositories There are provisions for recognition of third country CCP and trade repositories in certain circumstances, depending on equivalent legal and supervisory frameworks being in place Segregation and porting Both CCPs and their clearing members will be required to offer individual client segregation and omnibus client segregation to their clients on reasonable commercial terms Where clients opt for individual segregation, any margin in excess of the CCP s requirement must also be held at the CCP CCPs and clearing members must publicly disclose the levels of protection and costs associated with different levels of segregation, including a description of the main legal implications and applicable insolvency law CCPs must commit to trigger procedures for the transfer of assets and positions held by a defaulting clearing member for the account of its clients to another clearing member designated by the relevant clients on the clients request and without the consent of the defaulting clearing member The other clearing member will only be required to accept the transfer where it has previously committed to do so In the absence of a transfer, the CCP may manage its risk according to its rules, including liquidating assets and positions Any collateral balance owed by the CCP after completion of the clearing member s default management process by the CCP must be returned to the clients when known to the CCP or, if not know, to the clearing member for the account of its clients 24

28 EMIR: Other Provisions (cont d) Exchange-traded derivatives Some EMIR provisions are not limited in application to OTC derivative contracts but also extend to derivative contracts traded on an exchange The EMIR trade reporting requirements will apply to exchange traded derivatives Segregation and porting requirements will also be relevant to exchange traded derivatives Technical standards The following nine RTS and ITS came into force on 15 March 2013, but specific requirements are being phased in pursuant to the timelines included in those measures: RTS on capital requirements for central counterparties RTS on requirements for central counterparties RTS on indirect clearing arrangements, the clearing obligation, the public register, access to a trading venue, non-financial counterparties, risk mitigation techniques for OTC derivatives contracts not cleared by a CCP ITS on requirements for central counterparties ITS on the minimum details of the data to be reported to trade repositories ITS specifying the details of the application for registration as a trade repository RTS on the minimum details of the data to be reported to trade repositories RTS specifying the details of the application for registration as a trade repository RTS specifying the data to be published and made available by trade repositories and operational standards for aggregating, comparing and accessing the data 25

29 Questions Please submit your questions to You may also contact the speakers directly. Their contact information is below. Michael Mykytiw Executive Director, Regulatory Product Solutions, J.P. Morgan Tel: Melissa Maxim Vice President, Regulatory Product Solutions, J.P. Morgan Tel:

30 English_Commercial Bank a.pptx This presentation was prepared exclusively for the benefit and internal use of the J.P. Morgan client to whom it is directly addressed and delivered including such client s subsidiaries, (the Company ) in order to assist the Company in evaluating, on a preliminary basis, certain products or services that may be provided by J.P. Morgan. This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by J.P. Morgan. It may not be copied, published or used, in whole or in part, for any purpose other than as expressly authorized by J.P. Morgan. The statements in this presentation are confidential and proprietary to J.P. Morgan and are not intended to be legally binding. Neither J.P. Morgan nor any of its directors, officers, employees or agents shall incur any responsibility or liability to the Company or any other party with respect to the contents of this presentation or any matters referred to in, or discussed as a result of, this document. J.P. Morgan makes no representations as to the legal, regulatory, tax or accounting implications of the matters referred to in this presentation. IRS Circular 230 Disclosure: JPMorgan Chase & Co. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters included herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone not affiliated with JPMorgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties. J.P. Morgan is a marketing name for the treasury services businesses of JPMorgan Chase Bank, N.A. and its subsidiaries worldwide. In the United Kingdom, JPMorgan Chase Bank, N.A., London branch and J.P. Morgan Europe Limited are authorized and regulated by the Financial Services Authority JPMorgan Chase is licensed under US patent numbers 5, 910,988, and 6, 032 and JPMorgan Chase & Co. All rights reserved.