JPMorgan is working toward setting up its first prime brokerage desk in London and New York. The desk will start by offering total-return swaps, dubbed Prime Swap, in which hedge funds can pay or receive baskets of assets in return for a LIBOR-based rate, according to Christian Dalban, European head of equity and equity derivatives trading in London.
The initiative has hired Jeremy Rose, former head of U.K. prime brokerage at Nomura International, to establish the desk in London.
The desk is a result of the merger between JPMorgan and Chase Manhattan, according to Dalban. He added, JPMorgan brought the equity derivatives knowledge and Chase brought the custody and clearing capacity. Prime Swap will give the firm the look and feel of a prime brokerage desk but not the legal framework as the contracts will be executed through International Swaps and Derivatives Association master agreements. However, Dalban said it is working toward a full desk, "we can't be a full-blown investment bank without a prime brokerage desk. It is just a question of when."
Philippe Teilhard de Chardin, head of prime brokerage at Fimat International Banque in London, said it is a hard market for new entrants. He added that JPMorgan's name will be important in winning business at the beginning, but it is the quality of its services that will determine the firm's success. He speculated that JPMorgan was looking at jumping into the market now because hedge funds are once more in favor.
Another prime broker added that prime brokerage is also the only part of the equity markets that made any money last year so it is logical to look at setting up a desk. Rivals said that JPMorgan's entrance to the market would introduce an extra element of competition but added it is a hard market to crack as it has different clients from the usual interbank equity derivatives players.
Rose, who started last week, was head of treasury and stock lending at Jiway, a European and U.S. stock exchange for retail investors. When Rose was at Jiway he reported to Ian McNeil, coo in London. McNeil has since left Jiway and is now head of fixed income and derivatives operations at Nomura International in London.
