Northern Trust claimed today to have become the first custodian to have successfully settled a live market (or unscripted) custodial foreign exchange deal within CLS Bank. Northern Trust said the milestone, risk-free trade settled on time on the morning of 13 February 2004, and was on behalf of a London based investment manager.
“For the first time, this development offers investment managers and clients the opportunity to see their foreign exchange transactions complete in a settlement risk free environment,” says Sean O’Donovan, Vice President and Manager of Foreign Exchange and Cash Management Operations at Northern Trust in London. “We believe that as a global custodian, we have a responsibility to provide risk-free settlement whenever possible.”
A custody foreign exchange deal involves an investment manager, a counterparty and a custodian, and is therefore a more complicated transaction in terms of settlement than the inter-bank deals that have settled in CLS to date.
Northern Trust is one of 67 shareholder members of CLS. “This is a fine example of what the CLS community are able to achieve by working closely together,” adds O’Donovan. “This milestone will hopefully provide the impetus for other investment managers to embrace CLS as their preferred mechanism for foreign exchange settlement.”