Three leading banks onboarding to CLS’s bilateral payment netting calculation service, CLSNet
CLS today announced that Deutsche Bank, Mashreq and Standard Chartered are at various stages of onboarding to CLSNet, a standardized, automated bilateral payment netting calculation service for approximately 120 currencies. They will join the growing CLSNet community of global and regional banks, which includes seven of the top ten global banks.
CLSNet standardizes and centralizes post-trade processes across the global currency spectrum and in doing so reduces risk, enhances efficiency and improves liquidity for a growing network of FX market participants.
Using CLSNet also helps FX market participants adhere to the FX Global Code – the industry’s global principles of good practice for the FX market. In particular, using the service supports adherence to Principles 35 and 50,1 as all trade instructions sent to CLSNet are validated and matched up to the pre-determined cut-off times between counterparties for each currency. This ensures that only matched trade instructions are included in the automated net calculation and that there is a single common record of the net payment obligations. By automating the netting process via a centralized platform, users benefit from greater operational efficiency and increased risk mitigation for currencies that are not currently eligible for CLSSettlement.
Lisa Danino-Lewis, Chief Growth Officer, CLS said: “The addition of Deutsche Bank, Mashreq and Standard Chartered demonstrates the appeal of CLSNet to all market participants exploring ways to mitigate settlement risk, reduce operational costs and optimize liquidity for their post-trade FX trading processes. Given the sharp focus on settlement risk mitigation across the industry, CLS is collaborating with market participants to further evolve CLSNet and to facilitate adoption for a wide range of participants.”
Mark Edwards, Group Head of Operations, Mashreq added: “CLSNet will enable us to not only mitigate risk and improve efficiency, but also optimize liquidity and reduce funding requirements for our front office. This is an exciting proposition that will deliver significant benefit for our institution and the broader FX ecosystem. Participating in CLSNet also supports Mashreq’s adherence to the principles of the FX Global Code.”
Paul Scott, Managing Director, Financial Markets Operations, Standard Chartered commented: “We are delighted to be part of the growing network exploring with CLS risk mitigation via automated payment netting calculations, while providing an enhanced settlement offering for our clients and benefiting from significant operational efficiencies. We also support efforts to address systemic risk in the broader FX market, and so welcome the opportunity to collaborate with CLS to achieve this.”
1Principle 35 provides that market participants should reduce their settlement risk as much as practicable, including via PvP settlement, and encourages the use of automated settlement netting systems. Principle 50 provides that market participants should properly measure, monitor and control their settlement risk and includes recommendations concerning the confirmation of bilateral net amounts and the agreement of predetermined cut-off points.