For specific details on how to begin settling payment instructions via CLS, please contact your custodian bank to establish whether it offers CLS settlement services.
The investment management industry (hedge funds, pension funds, overlay funds and third party custodians) has placed increasing importance on FX trading in recent years.
Currency is recognized as an asset class in its own right. Investment in cross-border securities has seen increasing interest, and forward contracts are used to hedge currency exposure within a portfolio. Increasingly, FX trading with third parties is mandated and demands competitive rates. These exchanges of currency carry exposure to settlement risk.
CLS allows investment managers to proactively manage settlement throughout the trade lifecycle in real time. CLS broker banks and fund custodians submit payment instructions to CLS where they are matched promptly.
Unmatched payment instructions are easily identified and resolved. Matched payment instructions are stored by CLS and processed for settlement on their scheduled settlement date. This gives investment managers and their middle office staff a dramatically improved level of oversight over the entire process and the time to resolve any issues with their custodian or broker bank prior to the settlement date. In addition, the investment management industry also receives other benefits including:
- Operational efficiency and cost savings
- Active management of settlement process
- Minimized interest charges
- Improved liquidity management
- Increased reconciliation speed
- Increased trading lines
The investment management community can settle through CLS if their custodian and FX broker bank have the ability to do so. For specific details on how to begin settling payment instructions via CLS, please contact your custodian bank to establish whether it offers CLS settlement services.