CLS Bank today authorised its Settlement Members to offer its Continuous Linked Settlement service to all their clients. All financial institutions, corporations, banks, and fund managers trading in the $US 1.2 trillion a day foreign exchange market now have the potential to access the CLS Bank settlement service.
CLS Bank adds that a cumulative total of over $US 5 trillion has been settled in CLS Bank in the two months since it commenced operations. “Approximately $US 300 billion is now being settled daily with a 100% settlement success rate ,” says CLS Bank. ” Nearly 30,000 payment instructions derived from foreign exchange deals are now being put through CLS Bank each day by its first 39 Settlement Member institutions. A number of these institutions will now add their bank customers’ foreign exchange volume, further reducing the settlement risk in to-days’ foreign exchange market. Over 50 Settlement Members will be settling via the CLS service by the end of the year increasing CLS volume. CLS’s 67 shareholders represent over 80% of the world’s foreign exchange business by value. CLS Settlement Member Banks will be able to offer a variety of services to their customers, transforming the traditional patterns of the bank-to-bank market. Settlement Members can offer new levels of real time information not available outside CLS, more efficient cycling of liquidity in CLS currencies, and potential to trade with increased numbers of counter-parties. Liquidity flow previously tied up in the settlement process is being freed up through an average 97% reduction in numbers of payment instructions needed for settlement that CLS enables. “
Suzanne Labarge, Chairman of CLS Group adds: “Our shareholders, the world’s major institutions can now introduce instructions from their customers to CLS Bank. This will provide one transparent system, enabling banks to see who they are dealing with, who is paying and when they are settling. As more banks access CLS and reduce risk so traders have more opportunity to do business with additional counter parties. Now we are able to see transactions from beginning to end in short timeframes not possible before CLS’ launch, increasing the efficiency of banks globally over time.”
Joseph De Feo, CEO of CLS Group and President and CEO of CLS Bank also commented.
“Final and irrevocable simultaneous settlement transforms the centuries old patterns of the bank-to-bank market settlement procedure ,” he says. ” This is the highest cross border settlement standard in the market, and has the potential to increase the trading volume of multi-currency financial instruments. Aware of this, our first step is keeping the high standards of operation we have achieved in trialing and introducing CLS. Our second is driving out the efficiencies CLS can bring to the inevitable growth of cross border business and its role in developing new markets. Our Settlement Members are already receiving cost benefits from the liquidity management, Straight Through Processing (STP) and reduction of reconciliation errors CLS brings.”
CLS has now closed its controlled live phase. This phase introduced the first 39 Settlement Members, who had passed CLS Bank trials, processing bank-to-bank foreign currency settlement instructions.
These Settlement Members can now offer CLS services to their bank customers.
CLS is open for settlement to the market and can only be accessed through a CLS Bank Settlement Member.
Continuous Linked Settlement enables cross border currency transactions to be settled intraday on a payment versus payment basis. It is a real time, global settlement system that aims to eliminate the settlement risk caused by delays arising from time-zone differences. Previously banks had to rely on a global network of correspondents and a degree of faith that they had received their payments in one currency as they paid away another.
The CLS service is offered by CLS Bank International, and is supported by over 65 of the world’s largest global financial institutions. Together they account for a substantial majority of the cross-currency transactions across the globe.
CLS Bank International will link to the Real Time Gross Settlement systems operated by Central Banks in seven currencies (US Dollar, Euro, UK Sterling, Japanese Yen, Swiss Franc, Canadian Dollar and Australian Dollar. Additional currencies will be added over time with three Scandinavian currencies (Swedish Krona, Danish Kroner and Norwegian Krone) and the Singapore, Hong Kong and New Zealand Dollars due to become CLS Bank eligible currencies once all the requirements in CLS Bank’s rules have been satisfied. CLS Bank is based in New York and is regulated as an Edge Corporation bank by the Federal Reserve Bank of New York.