How CLS works

Following an FX transaction, Settlement Members submit payment instructions to CLS, on average, within 30 minutes of execution.

On arrival at CLS, these payment instructions are authenticated and matched by CLS. Payment instructions are maintained by the system until settlement date.

The CLS daily settlement cycle operates with settlement and funding occurring during a five-hour window when all real time gross settlement (RTGS) systems in the CLS settlement currency jurisdictions are open and able to make and receive payments. This enables simultaneous settlement of the payments on both sides of a FX transaction. 

Each Settlement Member holds a single multicurrency account with CLS. At the start and end of a normal settlement day, each Settlement Member has a zero balance in its account. Under normal operations of the settlement service, CLS starts and ends the day with a zero balance in its central bank accounts and in its Settlement Member accounts. Settlement Members may submit payment instructions relating to their own FX transactions as well as the FX transactions of their third party customers directly to CLS.

CLS maintains accounts with each of the central banks whose currencies settle in CLS. CLS, Settlement Members and the national RTGS systems communicate via SWIFT.

On each settlement date, upon determining that the accounts of the submitting Settlement Members satisfy several risk management tests, CLS simultaneously settles each pair of matched payment instructions by making the corresponding debit and credit entries in the Settlement Members’ accounts at CLS. The settlement of the payment instructions and the associated payments are final and irrevocable. This finality is one of the most important elements of the CLS system.