Annual Report and Consolidated Accounts

31 December 2017

CLS Group Holdings AG

Chairman's statement

2017 and 2018 are periods of significant investment in our growth initiatives.

CLS had a strong year. Our results met or exceeded our expectations. As we move into the third year of flat tariffs, our company produced considerable profit on modestly
improved values. 

The main settlement service (CLSSettlement) was delivered with the exceptional quality the market demands. We improved market share despite limited room for growth given our market position. Overall market FX volumes in our core currencies continued the low growth trajectory we have witnessed since the financial crisis. 

We remain committed to strong capital resources in all our operating subsidiaries. Our internal levels of capital reserves are managed well in excess of any current or proposed regulation, which we believe is appropriate for a critical market utility. As previously highlighted, 2017 and 2018 are periods of significant investment in our growth initiatives. Collectively, these growth initiatives will deliver a far more comprehensive FX post trade service. All of these services are designed to deliver enhanced risk, capital and liquidity management at a value you have come to expect. CLSNow, our same day gross PvP settlement service, will be the most innovative option added to CLSSettlement since the service went live. CLSNet, our bilateral payment netting service that targets non-CLS currencies, is currently in alpha testing. CLSClearedFX, a new service for cleared deliverable FX products, is in acceptance testing at two of the most innovative global clearing houses. Our FX data services products were launched in 2017 and have been well received. As these products come online, it is easy to envision the value delivered by our data services growing considerably.

We will experience a reduction in our net profit and ROE for several years as these solutions require considerable investment while building revenue. We are consciously launching new products at price points that reflect the scale we expect to achieve at margins appropriate for a financial market infrastructure. The adoption rate on new products in these critical areas is rightly subject to a rigorous business case and acceptance testing with each client.

Both the Board and Executive Management Committee believe the right approach is sustained investment in growth, while ensuring we balance this against the resource, investment and regulatory requirements of CLSSettlement so that it continues to deliver the high quality service our shareholders and settlement members expect. A representative example of this in practice is our legal entity review, where we are exploring the creation of a new organizational structure which ensures we deploy the right level of resource and capital investment to CLSSettlement, while also delivering on our commitment to release even more solutions that meet our clients’ needs.

CLS is evolving to meet the challenges of the market and, as a critical market infrastructure, leading the development of trusted market solutions.

As Chairman I would also like to use this opportunity to thank our departing Board members, all three of whom have had long standing positions at CLS. Sir John Gieve, who has served as Chairman of the Risk Management Committee, Paul Riordan, who previously served as Chairman of the Nominating and Governance Committee and is currently Deputy Chairman of the Risk Management Committee, and David Hudson, who until recently served as the Chairman of the Technology and Operations Committee, will all retire in May 2018. All three individuals, as senior representatives of the wholesale financial market and CLS, have made invaluable contributions to the organization over many years. I thank them for their leadership and stewardship and wish them every success in their future endeavors. 

CLS is evolving to meet the challenges of the market and, as a critical market infrastructure, leading the development of trusted market solutions. In 2017 we laid the foundations for an exciting new range of products. I confidently look to the Executive Management Committee with anticipation as we bring multiple products to market in 2018 that will make the trading process faster, easier, safer and more cost effective for the broadest number of market participants.

 


Ken Harvey
Chairman of the Board

Annual financial report 2017