1 November 2021

CLS welcomes FSB Progress Report on Cross-Border Payments Roadmap

CLS, a market infrastructure delivering settlement, processing and data solutions across the global FX ecosystem, welcomes the Financial Stability Board’s (FSB) continued efforts to mitigate settlement risk in FX markets in partnership with the international regulatory community and private sector.

In its progress report on the G20 roadmap for enhancing cross-border payments, the FSB states that most of the milestones set for 2021 have been successfully completed or are close to finalization. CLS is encouraged by the FSB’s assertion that, as a next step, the Committee on Payments and Market Infrastructures (CPMI) “will develop proposals for increased adoption of PvP by encouraging (i) enhancements to existing PvP arrangements and/or (ii) the design of new public sector and/or private-sector solutions for PvP arrangement[s] that currently do not exist by April 2022”.

Long advocating for greater PvP adoption to mitigate FX settlement risk, CLS has worked closely with both the public and private sectors to highlight its importance and therefore fully supports the FSB roadmap’s efforts in this area. As a financial market infrastructure (FMI) that operates the leading PvP settlement system for FX transactions (CLSSettlement), CLS has already responded to the CPMI’s call for industry expert responses on the topic of cross-border payments and will continue to participate in this initiative.

In support of these public policy efforts to mitigate settlement risk in the FX market, CLS has established a working group comprising 12 of its settlement members with global operations to develop a PvP solution for transactions with currencies that are currently ineligible for CLSSettlement. This work is being planned with the CPMI timelines in mind to ensure CLS is well placed to provide input as the roadmap progresses. Expanding the availability of PvP to a wider range of currencies and market participants can mitigate FX settlement risk and reduce liquidity requirements.

To better understand settlement risk for currencies that are not currently eligible for CLSSettlement and how FX trades are settled in those currencies, CLS is also working with its settlement members to analyze their settlement activity. It is expected that the results will provide further transparency on settlement behavior in the FX market and enable CLS to contribute useful findings and conclusions towards a range of key policy initiatives.

Further, CLS supports the recent changes to the FX Global Code that place greater emphasis on the use of PvP settlement mechanisms where available and provide more detailed guidance on the management of settlement risk where PvP settlement is not used.

Marc Bayle de Jessé, CEO of CLS, said: “We applaud the work that the FSB and CPMI are undertaking to address the challenges of cross-border payments, and we welcome future dialog on the roadmap and its implementation.

“We believe that public and private sector collaboration is the most effective route to addressing increased settlement risk through an alternative PvP mechanism, and we have been working with both sides to find an optimal solution for the FX industry. The CLS working group evaluating alternative PvP models is planning its work with the roadmap’s timelines in mind to ensure we are well placed to provide input during the course of roadmap implementation.”

Click here to read the FSB Progress Report

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