CLS, the long-awaited and much-delayed cross-border foreign exchange settlement utility, today inched closer to its aim of eliminating intra-day Herstatt settlement risk with the launch of a SWIFT-style vendor registration programme: the global CLS Vendor Registration Programme.
The opportunity for vendors – software providers, systems houses and consultants – to get a seal of approval from CLS stems from the fact that CLS will link seven of the world’s central bank real time gross settlement systems for the first time, creating a need for new systems and applications to enable commercial and investment banks, their agents and central banks to cope with the resultant demands.
“CLS Settlement fundamentally changes the handling of foreign exchange settlement instructions,” explains CLS. “The intra-day settlement risk is replaced by a five hour real time settlement window. Settlement is final and irrevocable or funds are returned same day. Change on this scale involves operations and technology preparation, reviewing the management of existing correspondent banking arrangements, contingency planning and liquidity management. Numerous new products and services are being developed and delivered to support both CLS shareholder banks and their own potential customer base by an expanding vendor community. Five CLS shareholders alone represent over 40 percent of the FX market. The CLS Vendor Registration Programme draws vendors into the CLS `financial Eco System.’ Specifically, the core vendors subscribing to the programme will be provided with up to date briefings, a dedicated website, and formal technology releases. In addition, they will receive support through direct access to the management implementation team and technical documentation. Registered vendors will also be permitted to use the CLS Registered brand mark.”
Joseph De Feo, Chief Executive Officer of CLS Group added: “With the average daily turnover in global FX transaction recently estimated at almost US$2 trillion there has never been more of a need to reduce settlement risk. CLS represents the most dramatic change in settlement for over 300 years, involving over 65 of the world’s largest banks, which have invested more than $300 million in CLS. The objective of CLS Vendor Registration programme is to assist shareholders in the implementation of this unique system. The intention is to migrate vendors to the role of participants, rather than just suppliers and in doing so assist in the implementation of CLS.”
CLS will 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. ” CLS represents the most dramatic change in FX settlement for over 300 years – 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 ,” gushes a CLS press release. “CLS turns this faith into certainty. “
CLS 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 ) initially . Other currencies will be added over time , with three Scandinavian currencies (Swedish Krona, Danish Kroner and Norwegian Krone) and the Singapore Dollar due to become CLS – eligible currencies in 2003.