JP Morgan Chase 2014 Annual Report Download - page 295

JPMorgan Chase & Co./2014 Annual Report 293
have to make any material payments under these
arrangements and the risk of loss is expected to be remote.
For information on the derivatives that the Firm executes
for its own account and records in its Consolidated Financial
Statements, see Note 6.
Exchange & Clearing House Memberships
Through the provision of clearing services, the Firm is a
member of several securities and derivative exchanges and
clearinghouses, both in the U.S. and other countries.
Membership in some of these organizations requires the
Firm to pay a pro rata share of the losses incurred by the
organization as a result of the default of another member.
Such obligations vary with different organizations. These
obligations may be limited to members who dealt with the
defaulting member or to the amount (or a multiple of the
amount) of the Firm’s contribution to the guarantee fund
maintained by a clearing house or exchange as part of the
resources available to cover any losses in the event of a
member default. Alternatively, these obligations may be a
full pro-rata share of the residual losses after applying the
guarantee fund. Additionally, certain clearinghouses require
the Firm as a member to pay a pro rata share of losses
resulting from the clearinghouse’s investment of guarantee
fund contributions and initial margin, unrelated to and
independent of the default of another member. Generally a
payment would only be required should such losses exceed
the resources of the clearing house or exchange that are
contractually required to absorb the losses in the first
instance. It is difficult to estimate the Firm’s maximum
possible exposure under these membership agreements,
since this would require an assessment of future claims that
may be made against the Firm that have not yet occurred.
However, based on historical experience, management
expects the risk of loss to be remote.
Guarantees of subsidiaries
In the normal course of business, JPMorgan Chase & Co.
(“Parent Company”) may provide counterparties with
guarantees of certain of the trading and other obligations of
its subsidiaries on a contract-by-contract basis, as
negotiated with the Firm’s counterparties. The obligations
of the subsidiaries are included on the Firm’s Consolidated
balance sheets or are reflected as off-balance sheet
commitments; therefore, the Parent Company has not
recognized a separate liability for these guarantees. The
Firm believes that the occurrence of any event that would
trigger payments by the Parent Company under these
guarantees is remote.
The Parent Company has guaranteed certain debt of its
subsidiaries, including both long-term debt and structured
notes sold as part of the Firm’s market-making activities.
These guarantees are not included in the table on page 288
of this Note. For additional information, see Note 21.