CLS turns to vendors for cash injection

Vendors that want to stay up-to-date with Continuous Linked Settlement Services (CLS) and use its brand mark to market their related products will have to pay an annual fee of £2,500 ($3,825) from August, said a spokesperson at CLS in London.

CLS - aimed at eliminating counterparty risk in the foreign exchange market - was originally supposed to launch in October 2000, but was delayed by technological glitches. Once live, banks using the CLS settlement system will settle their FX transactions through New York-based CLS Bank, in a real-time five-hour window. CLS was created to reduce systemic risk in FX following concerns that the failure of a major bank could have knock-on effects for the banking system, as identified after the collapse of Germany's Bank Herstadt.

Information services for CLS - scheduled for launch in October this year - have until now been free of charge. "We've been looking closely at our costs and can now only focus on those who'll pay for it," said the CLS spokesperson. "It's a commercial imperative."

But the move has angered vendors, who believe they have already spent enough money on CLS compliance.

"The general consensus among vendors is that we've spent a lot of money on building products for the CLS system and we've suffered a lot of delays," said a source at one of the CLS vendors in London. "This is just an additional burden, and we'll have to consider very carefully whether or not it's beneficial to pay these fees."

The payment is part of a 'vendor registration programme' launched last week. The aim, said Joseph De Feo, CLS Group's chief executive, is "to migrate vendors into the role of participants in the venture, rather than just suppliers".

The programme targets any firms that provide CLS services to the industry, including software providers, systems houses and consultants. These include IBM, Wall Street Systems and SunGard. CLS aims to register at least 40 vendors on the new programme before the end of the year. In return for the fee, participants receive e-mail updates on CLS's progress as well as access to documents and conference calls with De Feo.

The fee also covers registration to the CLS website, and to a new site due for launch at the start of September this year, said the spokesperson. This will allow vendors to market their products on the site using the CLS brand mark.

Vendors can pay the higher fee of £5,000 ($7,650) for the 'registered plus' package to receive extra services from CLS, including training on how the settlement process operates, and testing facilities to ensure their products and services work successfully on the new network.