CLS enhances financial stability by providing risk mitigation and operational services for the global FX market.
CLS plays a fundamental role in the foreign exchange (FX) market – it operates the largest multicurrency cash settlement system to mitigate settlement risk for the FX transactions of its Members and their customers.
Owned by the world's leading financial institutions, CLS settles payment instructions relating to underlying FX transactions in 18 major currencies and certain other transactions that result in one-way payments in a subset of those currencies.
The FX Market
The FX market is a key part of global economic activity. It is the largest financial market by value and is integral to global commerce. The reasons for exchanging currencies are as diverse as the community who trade them. This community includes central banks, commercial banks, small and large corporations and the fund management industry.
All members of the FX community potentially bear the risk of loss of principal due to settlement risk. Settlement risk, also known as “Herstatt risk,” is widely recognized as the most significant systemic risk to participants in the FX market, meaning the mitigation of it is a high priority for the community as a whole.