Clients of banks that have signed up as settlement members to CLS Bank can from today have their foreign exchange transactions settled on continuous linked settlement (CLS), the system built to reduce risk in the global forex markets.Settlement members have already put $5 trillion worth of forex transactions through CLS since it went live eight weeks ago. Now they can outsource these services to key bank, fund management and corporate clients.
Banks such as HSBC, JP Morgan Chase, Citigroup and ABN Amro, among others, have signed up a number of their clients to settle trades through CLS.
The potential flow increase through CLS could be significant. Currently, there are about $1.2 trillion of forex trades executed around the world every day but, so far, CLS only handles about $300 billion a day.
Settlement members are luring in clients with the benefits of enhanced levels of real-time information, more efficient cycling of liquidity in CLS currencies and the potential to trade with an increased number of counterparties.
CLS claimed that liquidity flow tied up in the settlement process is being freed through an average 97% reduction in the number of payments instructions needed for settlement on CLS.
“As more banks access CLS and reduce risk, so traders have more opportunity to do business with additional counterparties,” said Suzanne Labarge, chairman of CLS Group.
More on Settlement Risk
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