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Derivatives

Bank One Acquisition To Breathe Life Into JPMorgan's Distribution

Derivatives pundits think JPMorgan's move to purchase Bank One will give the bulge bracket a distribution capability that it has thus far lacked.

Derivatives pundits think JPMorgan's move to purchase Bank One will give the bulge bracket a distribution capability that it has thus far lacked. The planned acquisition follows the Citigroup model, which provides a one-stop shop for all financial products, explained one strategist. In the past few years Citigroup has acquired U.S. regional players including Golden State Bancorp. and Washington Mutual Finance as a means of extending its retail distribution network.

A strong investment bank needs to be tied to a retail platform that is also backed by a strong commercial bank and until now JPMorgan has only had two of the three legs, explained the strategist. Money raised from retail deposits is typically then recirculated to corporate clients, with the investment bank in turn facilitating this flow with a whole spectrum of high-margin products, many of which are structured with derivatives, he noted. JPMorgan will now be able to leverage Bank One's distribution to push structures as diverse as interest-rate swaps, principal-protected equity structures or possibly even the securitization of Bank One credit cards, he noted.

Bank One is not considered a major derivatives player with its most advanced presence being in interest-rate and foreign exchange derivatives, which the firm has been building over the past year. John Anderson, head of interest rate derivatives and global foreign exchange trading in Chicago, said the two firms were beginning meetings but it is too early to say how the two businesses will be integrated.

Thomas Kelly, spokesman in Chicago, noted that the firm's equity derivatives division is largely focused on convertibles. JD Cronin heads equity derivatives trading while David Stowell heads convertible securities origination, he said. In credit meanwhile, Tim Van Housen, managing director and senior originator in structured credit, left the firm last September (DW, 9/15) and is not thought to have been directly replaced.

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