2020 was a year of challenges. The speed at which the Covid-19 pandemic escalated, the severity of lockdowns across the world, the size of global stimulus measures and the impact of global macro events, such as the US presidential election and Brexit, caused unprecedented spikes in market volatility.
New product adoption slowed somewhat due to the Covid-19 pandemic as the technical changes required for any client to adapt their current practices to leverage our offering likely suffered a six-month delay. Despite these challenges, we remained focused on delivering our strategy, launching new collaborations to support FX portfolio optimization, delivering in-depth insight into market behavior through our data services, and proactively engaging with participants and policy makers on determining new ways to address the rise in settlement risk, in particular for emerging markets currencies. Of particular note has been the continued evolution of CLSNet, designed to address the challenges facing currencies ineligible for CLSSettlement. Having begun our investment program five years ago and launching the product in 2019, the ‘network effect’ of more participants joining is promising and will play a central role in mitigating risk and reducing operational cost for this growing market segment. The ultimate objective is a true paymentvs-payment service for these currencies, and I look forward to future releases providing enhanced functionality and connectivity.
“As a global FMI we have long recognized that CLS is purpose-driven. Our role is not to just serve shareholders, but employees, communities and the broader FX ecosystem.”
This uncertainty has further reinforced the importance of financial market infrastructures (FMIs) and the fundamental role we play in ensuring market stability. At all times, our focus has been on ensuring our clients can continue to rely on us and our services, through what has been one of the most turbulent years in modern history.
For CLS, we performed as strongly in the second half of the year as the first. We ran our settlement services with 100% availability throughout the year and continued at pace on our trajectory to complete the Convergence program to replace our legacy settlement technology infrastructure between late Q2 and early Q3 2021.
I’d like to extend my thanks to Marc, the Executive Management Committee and the broader CLS team for their dedication and resilience throughout 2020, and for ensuring we remain focused on delivering our strategy. As Marc’s first full year, this has been an immensely challenging time to lead the organization, but he has successfully steered CLS through this period and is well placed to deliver the next phase of our evolution. Marc brings a sense of purpose to the organization, which has resonated with clients, regulators, employees and the CLS Board.
As the pandemic, climate change and geopolitical instability have swept the globe, people are looking increasingly for organizations to step up and help address challenges in partnership with governments and the public. We have something of a head start in this respect – as a global FMI we have long recognized that CLS is purpose-driven. Our role is not to just serve shareholders, but employees, communities and the broader FX ecosystem.
This has led to much discussion at the CLS Board level. A key area of focus during 2020 was to define – in partnership with the Executive Management Committee, Communications & Marketing, client-facing teams and the broader leadership population – a purpose statement that reaffirms our commitment to the markets we serve. The statement, “strengthening resilience and efficiency in the FX ecosystem through global oversight and mutual ownership”, underpins our existence and acts as the guiding principle for how we operate. Our focus in 2021 will be to reinforce that position, not only delivering the high-quality service and market stability our clients expect, but also implementing our environmental, social and governance (ESG) program, demonstrating our sense of corporate citizenship in everything we do.
We also completed a comprehensive review and implementation of a revised corporate structure, which now more closely aligns to the long-term corporate strategy and overriding principle of protecting CLSSettlement. I have referred to these changes in previous reports and following approval by the Board and regulators, they came into effect on 1 January 2021. This new structure – with ‘product companies’ that provide settlement, processing and data products, ‘asset companies’ that own and manage intangible assets, and ‘service companies’ that provide support services to other CLS companies – is a pragmatic evolution that leverages existing structures while clearly separating settlement, processing and data activities within the CLS group of companies. It will also enhance financial transparency of CLS’s products and services through their lifecycles. You will see these changes in reporting reflected in future annual reports.
I am also pleased to report that our ongoing work to onboard the Chilean peso as the nineteenth currency on CLSSettlement continues to progress well, with the Banco del Estado de Chile having signed a letter of intent to formally join the service. We are working closely with the central bank of Chile to define a timeline and next steps for onboarding the currency.
You will find a more detailed progress report in Marc’s and Trevor’s messages regarding the development of our services. As we enter another challenging but also promising year, I am confident that Marc, the Executive Management Committee and the broader organization are ready to take on any challenge that may come their way.
Chairman of the Board