JPMorgan Chase & Co. · NYSE:JPM

JPMorgan Chase & — Investor Presentation (September 2009)

23 slides from JPMorgan Chase &'s investor presentation, Sep 29, 2009

1. Slide 1: The Impact of OTC Derivatives Industry Change on Buy-Side Operations

   The Impact of OTC Derivatives Industry Change on Buy-Side Operations U.S. Dial-in: 1-800-857-9667 International dial-in: +1-212-287-1652 Passcode: 3218552 September 29, 2009 ©2009 JPMorgan Chase & Co. All rights reserved. JPMorgan Chase Bank, N.A.

2. Slide 2: Agenda

   Agenda • Background • Central Counterparty Clearing • Central Settlement • Derivatives Collateral Management • Credit Derivatives Standardisation • Trade Reporting & Transparency 2 ©2009 JPMorgan Chase & Co. All rights reserved. JPMorgan Chase Bank, N.A.

3. Slide 3: Background

   Background September 29, 2009 ©2009 JPMorgan Chase & Co. All rights reserved. JPMorgan Chase Bank, N.A.

4. Slide 4: Summary of buy-side commitments (June 2009 Fed Letter)

   2 June 2009 ‘Fed Letter’ Summary of buy-side commitments 30 Jun 2009 17 Sep 2009 General Notes „ Analysis complete for buy-side „ Weekly recording of CDS trades in a „ Reflects ‘whole industry’ commitments access to CDS clearing centralised regulated repository: only, excludes OMG dealer-specific an

5. Slide 5: Legislative change is coming

   Legislative change is coming US - OTC Derivatives Markets Act 2009 EC – Communication on Derivatives Markets 11 August 2009 3 July 2009 Key Proposals Key Proposals „ Central Clearing – requires standardised OTC „ Further Standardisation – incentivise investment derivatives to be centrally cleared by

6. Slide 6: Central Counterparty Clearing

   Central Counterparty Clearing September 29, 2009 ©2009 JPMorgan Chase & Co. All rights reserved. JPMorgan Chase Bank, N.A.

7. Slide 7: What is central counterparty clearing?

   What is central counterparty clearing? • Trade execution remains bilateral; once the trade is agreed, it is transferred (novated) to a central counterparty (CCP) • The CCP intermediates the trade, replacing original counterparty risk; the CCP guarantees financial performance, even if the party to th

8. Slide 8: CCP models are still evolving

   CCP models are still evolving Industry Industry Status Status // Plans Plans • Rapidly evolving CCP picture across credit and rates, but industry standards and operating models starting to take shape • June Fed Letter commitment to buy-side clearing of CDS by mid-Dec ’09; rates client clearing in 20

9. Slide 9: What might the buy-side model look like?

   What might the buy-side model look like? Example workflow for credit 1 Trade executed 2 Dealer submits trade executed bilaterally to middleware for matching Execution Client 1 Dealer „ CCP is specified, this is a matching field 3 Client Agrees trade in middleware (at this point legally binding bilat

10. Slide 10: How are buy-side process flows impacted?

    How are buy-side process flows impacted? FUNCTION FUNCTION Trade Capture Valuation „ Up-front capture of specified CCP as agreed with executing „ Move to CCP’s as source of MTM valuations on cleared trades broker „ Need to review and approve CCP valuation methodology by pricing „ ‘Give-up’ to DCM –

11. Slide 11: CCP checklist

    CCP checklist 9 Choice of CCP – Are you making an assessment of the various CCP provider offerings? 9 Selection of Clearing Broker(s) – Are you reviewing clearing broker capabilities? Who would be your backup broker? 9 Timeline – Are you aiming for implementation in 2009? 9 Middleware – Are you live

12. Slide 12: Central Settlement

    Central Settlement September 29, 2009 ©2009 JPMorgan Chase & Co. All rights reserved. JPMorgan Chase Bank, N.A.

13. Slide 13: Implementation of CDS central settlement

    Implementation of CDS central settlement Industry Status Industry Status // Plans Plans • Dealer community live on central settlement via DTCC TIW and CLS since Q4 2007 • Initial buy-side firms went live in May/June this year • Broader industry commitments for buy-side roll-out in 2009 have not been

14. Slide 14: Central settlement checklist

    Central settlement checklist 9 Process Reengineering – Have you adapted your settlement processes and controls? 9 Confirmation Dependency – Can you meet the necessary confirmation deadlines for all eligible events? 9 Backloading – Have you backloaded all of your eligible positions into DTCC TIW (30

15. Slide 15: Derivatives Collateral Management

    Derivatives Collateral Management September 29, 2009 ©2009 JPMorgan Chase & Co. All rights reserved. JPMorgan Chase Bank, N.A.

16. Slide 16: Developments in derivatives collateral management

    Developments in derivatives collateral management Industry Industry Status Status // Plans Plans • ISDA Dispute Resolution Protocol due on 30 September 2009 • ISDA Portfolio Reconciliation Best Practice due on 31 October 2009 • ISDA Hedge Fund Independent Amounts white paper due to be published 31 O

17. Slide 17: Collateral management checklist

    Collateral management checklist 9 Tracking Developments – Are you participating in the relevant ISDA forums to keep up to date with collateral and reconciliation initiatives? 9 Wait and See – Some of the developments around CCPs, especially around buy-side participation and scope, are still being wo

18. Slide 18: Credit Derivatives Standardisation

    Credit Derivatives Standardisation September 29, 2009 ©2009 JPMorgan Chase & Co. All rights reserved. JPMorgan Chase Bank, N.A.

19. Slide 19: Ongoing standardisation of credit derivatives

    Ongoing standardisation of credit derivatives Industry Industry Status Status // Plans Plans • The ISDA ‘Big Bang’ Protocol in April‘09 introduced the auction supplement and ‘hardwired’ auction settlement for CDS contracts • The ISDA ‘Small Bang’ Protocol in July‘09 incrementally refined the auction

20. Slide 20: Credit derivatives standardisation checklist

    Credit derivatives standardisation checklist 9Tracking Developments – Are you participating in the relevant ISDA forums to keep up to date with standardisation initiatives? 9Adherence – Did you adhere to the Big/Small Bang Protocols in April and July 2009? Did you check whether your counterparties h

21. Slide 21: Trade Reporting & Transparency

    Trade Reporting & Transparency September 29, 2009 ©2009 JPMorgan Chase & Co. All rights reserved. JPMorgan Chase Bank, N.A.

22. Slide 22: Trade reporting & transparency

    Trade reporting & transparency Industry Industry Status Status // Plans Plans • Regulatory goal of full transparency of the OTC markets, through implementation of a centralised reporting infrastructure • 2 June 2009 Fed letter — commitment to universal reporting of all trades not cleared through a C

23. Slide 23: For more information

    For more information • Visit: www.jpmorgan.com/visit/gds • Contact: – EMEA: Rob Wood +44-(0)207-777-0485 – United States: Darren Woolford at +1-212-552-0588 or Darren Measures at +1-212-623-5143 23 ©2009 JPMorgan Chase & Co. All rights reserved. JPMorgan Chase Bank, N.A.

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