Securities financing activities

JPMorgan Chase enters into resale agreements, repurchase agreements, securities borrowed transactions and securities loaned transactions (collectively, “securities financing agreements”) primarily to finance the Firm’s inventory positions, acquire securities to cover short positions, accommodate customers’ financing needs, and settle other securities obligations.

Securities financing agreements are treated as collateralized financings on the Firm’s Consolidated balance sheets. Resale and repurchase agreements are generally carried at the amounts at which the securities will be subsequently sold or repurchased. Securities borrowed and securities loaned transactions are generally carried at the amount of cash collateral advanced or received. Where appropriate under applicable accounting guidance, resale and repurchase agreements with the same counterparty are reported on a net basis. For further discussion of the offsetting of assets and liabilities, see Note 1. Fees received and paid in connection with securities financing agreements are recorded in interest income and interest expense on the Consolidated statements of income.

The Firm has elected the fair value option for certain securities financing agreements. For further information regarding the fair value option, see Note 4. The securities financing agreements for which the fair value option has been elected are reported within securities purchased under resale agreements; securities loaned or sold under repurchase agreements; and securities borrowed on the Consolidated balance sheets. Generally, for agreements carried at fair value, current-period interest accruals are recorded within interest income and interest expense, with changes in fair value reported in principal transactions

revenue. However, for financial instruments containing embedded derivatives that would be separately accounted for in accordance with accounting guidance for hybrid instruments, all changes in fair value, including any interest elements, are reported in principal transactions revenue.

Secured financing transactions expose the Firm to credit and liquidity risk. To manage these risks, the Firm monitors the value of the underlying securities (predominantly high-quality securities collateral, including government-issued debt and agency MBS) that it has received from or provided to its counterparties compared to the value of cash proceeds and exchanged collateral and either requests additional collateral or returns securities or collateral when appropriate. Margin levels are initially established based upon the counterparty, the type of underlying securities, and the permissible collateral, and are monitored on an ongoing basis.

In resale agreements and securities borrowed transactions, the Firm is exposed to credit risk to the extent the value of the securities received is less than initial cash proceeds and any collateral amounts exchanged. In repurchase agreements and securities loaned transactions, credit risk exposure arises to the extent that the value of underlying securities exceeds the value of the initial cash proceeds and, any collateral amounts exchanged.

Additionally, the Firm typically enters into master netting agreements and other similar arrangements with its counterparties, which provide for the right to liquidate the underlying securities and any collateral amounts exchanged in the event of a counterparty default. It is also the Firm’s policy to take possession, where possible, of the securities underlying resale agreements and securities borrowed transactions.

The following table presents as of September 30, 2015, and December 31, 2014, the gross and net securities purchased under resale agreements and securities borrowed. Securities purchased under resale agreements have been presented on the Consolidated balance sheets net of securities sold under repurchase agreements where the Firm has obtained an appropriate legal opinion with respect to the master netting agreement, and where the other relevant criteria have been met. Where such a legal opinion has not been either sought or obtained, the securities purchased under resale agreements are not eligible for netting and are shown separately in the table below. Securities borrowed are presented on a gross basis on the Consolidated balance sheets.



	September 30, 2015								December 31, 2014
(in millions)	Gross asset balance		Amounts netted on the Consolidated balance sheets			Net asset balance			Gross asset balance		Amounts netted on the Consolidated balance sheets			Net asset balance
Securities purchased under resale agreements
Securities purchased under resale agreements with an appropriate legal opinion	$	375,841	$	(161,197	)	$	214,644		$	347,142	$	(142,719	)	$	204,423
Securities purchased under resale agreements where an appropriate legal opinion has not been either sought or obtained	2,710					2,710			10,598					10,598
Total securities purchased under resale agreements	$	378,551	$	(161,197	)	$	217,354	^(a)	$	357,740	$	(142,719	)	$	215,021	^(a)
Securities borrowed	$	105,668	NA			$	105,668	^(b)(c)	$	110,435	NA			$	110,435	^(b)(c)


(a)	At September 30, 2015, and December 31, 2014, included securities purchased under resale agreements of $27.4 billion and $28.6 billion, respectively, accounted for at fair value.


(b)	At September 30, 2015, and December 31, 2014, included securities borrowed of $405 million and $992 million, respectively, accounted for at fair value.


(c)	Included $21.5 billion and $27.7 billion at September 30, 2015, and December 31, 2014, respectively, of securities borrowed where an appropriate legal opinion has not been either sought or obtained with respect to the master netting agreement.

The following table presents information as of September 30, 2015, and December 31, 2014, regarding the securities purchased under resale agreements and securities borrowed for which an appropriate legal opinion has been obtained with respect to the master netting agreement. The table below excludes information related to resale agreements and securities borrowed where such a legal opinion has not been either sought or obtained.



	September 30, 2015										December 31, 2014
			Amounts not nettable on the Consolidated balance sheets^(a)										Amounts not nettable on the Consolidated balance sheets^(a)
(in millions)	Net asset balance		Financial instruments^(b)			Cash collateral			Net exposure		Net asset balance		Financial instruments^(b)			Cash collateral			Net exposure
Securities purchased under resale agreements with an appropriate legal opinion	$	214,644	$	(211,255	)	$	(518	)	$	2,871	$	204,423	$	(201,375	)	$	(246	)	$	2,802
Securities borrowed	$	84,157	$	(81,413	)	$	—		$	2,744	$	82,748	$	(80,338	)	$	—		$	2,410

(a)

For some counterparties, the sum of the financial instruments and cash collateral not nettable on the Consolidated balance sheets may exceed the net asset balance. Where this is the case the total amounts reported in these two columns are limited to the balance of the net reverse repurchase agreement or securities borrowed asset with that counterparty. As a result a net exposure amount is reported even though the Firm, on an aggregate basis for its securities purchased under resale agreements and securities borrowed, has received securities collateral with a total fair value that is greater than the funds provided to counterparties.


(b)	Includes financial instrument collateral received, repurchase liabilities and securities loaned liabilities with an appropriate legal opinion with respect to the master netting agreement; these amounts are not presented net on the Consolidated balance sheets because other U.S. GAAP netting criteria are not met.

The following table presents as of September 30, 2015, and December 31, 2014, the gross and net securities sold under repurchase agreements and securities loaned. Securities sold under repurchase agreements have been presented on the Consolidated balance sheets net of securities purchased under resale agreements where the Firm has obtained an appropriate legal opinion with respect to the master netting agreement, and where the other relevant criteria have been met. Where such a legal opinion has not been either sought or obtained, the securities sold under repurchase agreements are not eligible for netting and are shown separately in the table below. Securities loaned are presented on a gross basis on the Consolidated balance sheets.



	September 30, 2015								December 31, 2014
(in millions)	Gross liability balance		Amounts netted on the Consolidated balance sheets			Net liability balance			Gross liability balance		Amounts netted on the Consolidated balance sheets			Net liability balance
Securities sold under repurchase agreements
Securities sold under repurchase agreements with an appropriate legal opinion	$	311,565	$	(161,197	)	$	150,368		$	290,529	$	(142,719	)	$	147,810
Securities sold under repurchase agreements where an appropriate legal opinion has not been either sought or obtained^(a)	14,070					14,070			21,996					21,996
Total securities sold under repurchase agreements	$	325,635	$	(161,197	)	$	164,438	^(c)	$	312,525	$	(142,719	)	$	169,806	^(c)
Securities loaned^(b)	$	20,738	NA			$	20,738	^(d)(e)	$	25,927	NA			$	25,927	^(d)(e)


(a)	Includes repurchase agreements that are not subject to a master netting agreement but do provide rights to collateral.


(b)	Included securities-for-securities lending transactions of $5.8 billion and $4.1 billion at September 30, 2015, and December 31, 2014, respectively, accounted for at fair value, where the Firm is acting as lender. These amounts are presented within other liabilities in the Consolidated balance sheets.


(c)	At September 30, 2015, and December 31, 2014, included securities sold under repurchase agreements of $3.6 billion and $3.0 billion, respectively, accounted for at fair value.


(d)	There were no securities loaned accounted for at fair value as of September 30, 2015, and December 31, 2014.


(e)	Included $41 million and $271 million at September 30, 2015, and December 31, 2014, respectively, of securities loaned where an appropriate legal opinion has not been either sought or obtained with respect to the master netting agreement.

The following table presents information as of September 30, 2015, and December 31, 2014, regarding the securities sold under repurchase agreements and securities loaned for which an appropriate legal opinion has been obtained with respect to the master netting agreement. The table below excludes information related to repurchase agreements and securities loaned where such a legal opinion has not been either sought or obtained.



	September 30, 2015										December 31, 2014
			Amounts not nettable on the Consolidated balance sheets^(a)										Amounts not nettable on the Consolidated balance sheets^(a)
(in millions)	Net liability balance		Financial instruments^(b)			Cash collateral			Net amount^(c)		Net liability balance		Financial instruments^(b)			Cash collateral			Net amount^(c)
Securities sold under repurchase agreements with an appropriate legal opinion	$	150,368	$	(146,749	)	$	(442	)	$	3,177	$	147,810	$	(145,732	)	$	(497	)	$	1,581
Securities loaned	$	20,697	$	(20,553	)	$	—		$	144	$	25,656	$	(25,287	)	$	—		$	369


(a)	For some counterparties the sum of the financial instruments and cash collateral not nettable on the Consolidated balance sheets may exceed the net liability balance. Where this is the case the total amounts reported in these two columns are limited to the balance of the net repurchase agreement or securities loaned liability with that counterparty.


(b)	Includes financial instrument collateral transferred, reverse repurchase assets and securities borrowed assets with an appropriate legal opinion with respect to the master netting agreement; these amounts are not presented net on the Consolidated balance sheets because other U.S. GAAP netting criteria are not met.


(c)	Net amount represents exposure of counterparties to the Firm.

Effective April 1, 2015, the Firm adopted new accounting guidance, which requires enhanced disclosures with respect to the types of financial assets pledged in secured financing transactions and the remaining contractual maturity of the secured financing transactions; the following tables present this information as of September 30, 2015.



	Gross liability balance
September 30, 2015 (in millions)	Securities sold under repurchase agreements		Securities loaned
Mortgage-backed securities	$	22,060	$	—
U.S. Treasury and government agencies	166,522		223
Obligations of U.S. states and municipalities	1,718		—
Non-U.S. government debt	89,573		621
Corporate debt securities	19,580		110
Asset-backed securities	5,238		—
Equity securities	20,944		19,784
Total	$	325,635	$	20,738



	Remaining contractual maturity of the agreements
	Overnight and continuous						Greater than 90 days
September 30, 2015 (in millions)	Overnight and continuous		Up to 30 days		30 – 90 days		Greater than 90 days		Total
Total securities sold under repurchase agreements	$	117,879	$	124,711	$	27,052	$	55,993	$	325,635
Total securities loaned	9,463		649		319		10,307		20,738

Transfers not qualifying for sale accounting

At September 30, 2015, and December 31, 2014, the Firm held $11.2 billion and $13.8 billion, respectively, of financial assets for which the rights have been transferred to third parties; however, the transfers did not qualify as a sale in accordance with U.S. GAAP. These transfers have been recognized as collateralized financing transactions. The transferred assets are recorded in trading assets and loans, and the corresponding liabilities are recorded predominantly in other borrowed funds on the Consolidated balance sheets.