J.P. Morgan & Co., following through on a strategy to take its in-house expertise to the online world, said Friday that it had created a company that will act as a back-office provider of derivatives transaction management and settlement services.
The company, Arcordia, is the latest example of Morgan's effort to tap in to the fast-growing New Economy. It is a joint venture by Morgan, which is supplying the derivatives know-how, and EDS Corp. of Plano, Tex., which is lending its information technology expertise.
EDS is to hold up to a 9% stake in the company, and Morgan plans to retain a minority interest as other partners join the venture, the banking company said in a statement. Morgan will transfer about 300 employees, many from its derivatives group, to the new company.
Morgan is the company's first client, but the goal is to attract other financial institutions and corporations, the company said.
Arcordia's services are intended to "eliminate capacity constraints, easily integrate new products, improve client servicing, and reduce ongoing investments" in the derivatives business, said Rafic Dahan, chief executive of the company and a former senior executive at Morgan.
Arcordia is the latest idea to come out of LabMorgan, a business unit the banking company announced with much fanfare last month.
LabMorgan, with a $1 billion budget, has set out to identify Morgan products and services that can be put into separate companies with the potential to be spun off as public entities. LabMorgan is also searching outside the banking company for start-up firms and other potential partners with which it could create Web-based services. Many of these online initiatives are aimed at making Morgan's capital markets services more efficient.
Other banking companies have similar online incubators. Chase Manhattan Corp.'s incubator has begun several Internet projects, many in collaboration with outside partners, to build up its business-to-business services. These projects include Intelisys, an electronic procurement business, and Spectrum, an electronic bill payment and presentment service.
Arcordia is the third such company started by Morgan, though the first major one since the formal unveiling of LabMorgan. Cygnifi, Morgan's online derivatives service venture, and MarketAxcess, a portal that links institutional investors and bond traders, were introduced earlier.
The new company is based in the United States, though its technology and marketing functions are centered in London. Two other senior Morgan executives have taken senior posts at Arcordia. Diane Brunsden has been named director of information technology, and David Marlborough has been named marketing and business services director.