CLS Bank Market Share Continues To Grow, Says TowerGroup

New research from TowerGroup predicts that CLS Bank International (CLS Bank) will continue to grow market share, and will be settling 83% of total Member volume by the end of 2007. TowerGroup independently conducted this research for a third consecutive

By None

New research from TowerGroup predicts that CLS Bank International (CLS Bank) will continue to grow market share, and will be settling 83% of total Member volume by the end of 2007.

TowerGroup independently conducted this research for a third consecutive year amongst 49 of CLS Bank’s Members and 43 third parties.

“The Continuous Linked Settlement (CLS) System: Results of the 2005 TowerGroup / CLS Survey of Settlement and Third-Party Members” study also predicted that the percentage of third parties settling over 50% of their FX volume through CLS Bank is set to rise from 64% now to 81% by the end of 2006.

In addition to significant back office benefits, CLS continues to have an impact in many areas of the front office. Eighty-two per cent of Members reported changes to the credit approval process, with 29% of Members eliminating settlement limits completely for CLS counterparties. Thirty-three per cent of Members and 45% of third parties also report changed trading practices as a result of CLS: 69% of Members reporting a change favoured CLS counterparties, and 56% increased spreads for non-CLS counterparties. Seventy-four per cent of third parties reporting a change also favoured CLS counterparties, and 53% received larger trading lines.

Cost and efficiency benefits were also revealed in the research. Of those third parties reporting a change in the cost of settlement, 62% said that costs had fallen following the implementation of CLS. Fifty-eight per cent of third parties had seen a reduction in trade failure rates, with 65% of these reporting that this had resulted in cost savings. Looking to the future, Member respondents predicted a doubling of the number of third parties (banks, corporations, fund managers, and other financial services institutions) by the end of 2007. The sectors and regions seen as having the biggest potential for third party growth were banks in Asia, corporates in Europe and investment funds in Europe.

Jonathan Butterfield, Executive Vice President of Marketing and Communication, CLS Bank International, said: “This latest TowerGroup survey confirms that not only is CLS Settlement the market standard for FX settlement, but it is now delivering demonstrable benefits to the 643 banks, brokers, funds and corporates that use the CLS Bank service. A core objective for CLS Bank is to ensure that the costs of the service to our Members remain on a downward trajectory. We can achieve this by providing increased value to participants which promotes volume growth from existing participants and enables a more compelling value proposition to attract new participants that in turn enables us to reduce prices. The results of this research show that this approach is succeeding and offers a very positive outlook for CLS and its stakeholders in the coming years.”

David Medeiros, Director of Research for Global Payments at TowerGroup, said: “This research clearly indicates that CLS is taking all the appropriate steps – adding new CLS-eligible currencies, supporting Settlement Members in their efforts to recruit new types of third-party participants such as corporations and fund managers, and extending the CLS product portfolio to new types of FX-related financial instruments – to optimize the value of the CLS system to the financial community. These steps all promote greater participation in the system and, as the survey respondents predict, ongoing growth in transaction volumes, which will in turn reduce per-transaction costs, enhancing the value of the system for all participants”

«