JP Morgan Chase 2014 Annual Report Download - page 157

JPMorgan Chase & Co./2014 Annual Report 155
Broker-dealer regulatory capital
JPMorgan Chase’s principal U.S. broker-dealer subsidiaries
are J.P. Morgan Securities LLC (“JPMorgan Securities”) and
J.P. Morgan Clearing Corp. (“JPMorgan Clearing”).
JPMorgan Clearing is a subsidiary of JPMorgan Securities
and provides clearing and settlement services. JPMorgan
Securities and JPMorgan Clearing are each subject to Rule
15c3-1 under the Securities Exchange Act of 1934 (the
“Net Capital Rule”). JPMorgan Securities and JPMorgan
Clearing are also each registered as futures commission
merchants and subject to Rule 1.17 of the Commodity
Futures Trading Commission (“CFTC”).
JPMorgan Securities and JPMorgan Clearing have elected to
compute their minimum net capital requirements in
accordance with the “Alternative Net Capital Requirements”
of the Net Capital Rule. At December 31, 2014,
JPMorgan Securities’ net capital, as defined by the Net
Capital Rule, was $12.8 billion, exceeding the minimum
requirement by $10.6 billion, and JPMorgan Clearing’s net
capital was $7.5 billion, exceeding the minimum
requirement by $5.6 billion.
In addition to its minimum net capital requirement,
JPMorgan Securities is required to hold tentative net capital
in excess of $1.0 billion and is also required to notify the
Securities and Exchange Commission (“SEC”) in the event
that tentative net capital is less than $5.0 billion, in
accordance with the market and credit risk standards of
Appendix E of the Net Capital Rule. As of December 31,
2014, JPMorgan Securities had tentative net capital in
excess of the minimum and notification requirements.
J.P. Morgan Securities plc is a wholly owned subsidiary of
JPMorgan Chase Bank, N.A. and is the Firm’s principal
operating subsidiary in the U.K. It has authority to engage in
banking, investment banking and broker-dealer activities.
J.P. Morgan Securities plc is jointly regulated by the U.K.
Prudential Regulation Authority (“PRA”) and Financial
Conduct Authority (“FCA”). Commencing January 1, 2014,
J.P. Morgan Securities plc became subject to the U.K. Basel
III capital rules.
At December 31, 2014, J.P. Morgan Securities plc had
estimated total capital of $30.1 billion; its estimated CET1
capital ratio was 10.7% and its estimated Total capital ratio
was 14.1%. Both ratios exceeded the minimum transitional
standards (4.0% and 8.0% for the CET1 ratio and Total
capital ratio, respectively) as established by the Capital
Requirements Directive and Regulation (the European
Union (“EU”) implementation of Basel III) as well as
additional minimum requirements specified by the
Prudential Regulatory Authority as Individual Capital
Guidance and PRA Buffer requirements.