In/Out Swaps
CLS Bank Members have pioneered the process of In/Out Swaps to help financial institutions manage intraday liquidity safely and cost-effectively.
With In/Out Swaps, payment obligations to CLS Bank can be reduced and liquidity pressures mitigated.
What is an In/Out Swap?
An In/Out Swap comprises two equal and opposite FX transactions that are agreed as an intraday swap. One of the two FX transactions is input to CLS, in order to reduce each Member's net position in the two currencies. The other is settled outside CLS.
The combined effect of these two FX transactions is a reduction in the intraday funding requirements of the two Members, whilst leaving the institutions' overall FX position unchanged. In/Out Swaps exploit the likelihood that an institution with a large short position in CLS will almost certainly have one or more large long positions in CLS.
As In/Out Swaps reduce these ‘in-CLS’ cash positions as well as the corresponding liquidity positions outside of CLS, banks can more easily manage liquidity flows for their non-CLS needs, as well as in the CLS Bank system.
CLS offers a full In/Out Swap service that identifies potential In/Out Swaps, notifies participants and implements In/Out Swaps efficiently through the CLS Bank system.
The multilateral netting effect together with the In/Out Swap process has proved to be extremely efficient, resulting in a pay in requirement from Settlement Members of less than 2% of the gross value of instructions being settled through CLS Bank.
For more information email joinus@cls-group.com