Principle 50 of the Code states that:

"Market Participants should measure and monitor their Settlement Risk and seek to mitigate that risk when possible.

Market Participants should develop timely and accurate methods of quantifying their FX Settlement Risk. The management of each area involved in a participant’s FX operations should obtain at least a high-level understanding of the settlement process and the tools that may be used to mitigate Settlement Risk.”

In addition, Principle 50 states that “…settlement services that reduce Settlement Risk—including the use of payment-versus-payment settlement mechanisms—should be utilised whenever practicable.”

All members of the FX community potentially bear the risk of loss of principal due to settlement risk, which is widely recognized as the most significant systemic risk to participants in the FX market. Mitigation of settlement risk is a high priority for the FX community as a whole. CLS mitigates that risk by operating the world’s largest multicurrency cash settlement service, providing the payment-versus-payment settlement envisaged by Principle 50.

For more information on our settlement service, please go to our product page: click here