CLS Bank says it has completed the first stage of live trials to make Continuous Linked Settlement (CLS) available to the foreign exchange market.
The bank says the “End to End” (E2E) trial completion is a significant milestone in its preparations to offer the full service. “Shareholder Trials” will now follow as the next step before the service is approved for full live commercial operation. CLS is subject to final regulatory approval before offering a live service: the New York-based bank will be able to provide services to its members only after the Board of Governors of the Federal Reserve System, has given its final approval.
CLS Bank says the End to End Trials saw CLS Bank process real value instructions for payment. All seven currencies on the system trailed together. Eleven “pilot shareholder banks,” which worked with the Bank during the trials, have successfully handled payments and settlements to the new CLS timeline using the seven central bank RTGS systems linked together in real time. New market liquidity requirements and timed payment deadlines were met. 80 per cent of the payment volumes expected in full live operation were handled by the system. An additional 28 shareholders participated in separate “payment trials” and met all requirements. The required “shareholder trials” for CLS Bank Settlement Membership will follow this month. The idea isfor them to prove they can manage the operational requirements for CLS Settlement in order to become CLS Bank Settlement Members.
Suzanne Labarge, Chairman of CLS Group, says: “After stringent testing and operational review CLS has proved the effectiveness of its settlement service. We are moving to wholly new operational and liquidity management procedures and CLS Bank has demonstrated it has the processes and skills to make them work. CLS Settlement is distinct in the risk reduction advantages and the commercial benefits it can bring to trading institutions and their counter-parties. We still have milestones – but no-one in the market underestimates the significance of reaching this step”.
Joseph De Feo, President and Chief Executive Officer of CLS Bank International added:”We are linking many of the world’s central banks, commercial institutions and their agents in one CLS “Eco-System”. The financial markets cannot today offer the real time settlement service – payment versus payment – CLS Bank provides. That is why our technical and operational testing must meet the highest standards. Entering Shareholder Trials to offer the Settlement service is an achievement – we still have stages to pass in rolling out the full service with equally high criteria to pass. Now, we need to do everything in our power to help our shareholders get ready to deliver CLS Settlement and ensure that our operations continue to meet the stringent standards for launching a commercial service”.