Japan’s leading life insurance company is now settling FX transactions in CLS

Demonstrates the significant demand from the non-bank community to access CLS’s risk mitigation services

CLS Group (CLS), a leading provider of risk mitigation and operational services for the global foreign exchange (FX) market, today announced the first Japanese non-bank financial institution (NBFI) to join the CLS system via third-party access.

Nippon Life Insurance Company, Japan’s leading life insurance company in terms of net profit, is now settling FX transactions in CLS via its settlement bank. In addition to reduced settlement risk, it will also benefit from streamlined trading operations, as well as liquidity benefits from netting that lower transaction costs while boosting trading and counterparty limit management efficiencies that support business growth opportunities.

Japan is one of the world's largest centers for currency trading and a crucial hub for the Asian FX community. The Japanese FX market accounts for 6.1% of global over-the-counter FX turnover¹. In recent years it has benefitted from a significant increase in cross-border currency flow and foreign direct investment, but this has also increased exposure within a wider range of market participants including funds and their counterparties.

The addition of Nippon Life marks another milestone in the continued growth of CLS participation across Asia. Last year Samsung Securities, a leading South Korean securities company, which became the first NBFI to become a third-party participant in South Korea, was joined by three more of the largest securities brokers and one fund in 2017. Third-party participation globally accounts for approximately 22% of the total value settled in CLS, and there was a 12% increase in the number of third-party participants using the service in the Asia Pacific region in 2016.

Rachael Hoey, Head of Asia at CLS, comments: "Adoption of PvP settlement by non-bank financial institutions is a crucial part of CLS’s strategy, aimed at ensuring risk is mitigated across the diverse FX market segments. Participation ensures more consistent and robust risk management standards for all market participants, important in supporting cross border investment and trading growth in the Japanese currency market.

“The addition of Nippon Life demonstrates the rising demand from the non-bank community to access CLS’s risk mitigation services. Our plans include further work to support diverse participation and deliver the unique benefits of CLS to a wider pool of counterparties.”

¹ Bank for International Settlements Triennial Central Bank Survey, 2016