Know your CLS terms:

Circles
In CLSSettlement, a process known as ‘circles’ settles any remaining payment instructions that could not be settled during the sequential settlement process.

Finality
In CLSSettlement the settlement of the payment instructions and the associated payments are final and irrevocable. ‘Finality’ is one of the
most important elements of CLSSettlement.

Forward
An FX forward transaction is a contract in which two parties agree today to exchange one currency for another at a pre-determined rate on a specific future date.

Liquidity
The state of owning things of value that can easily be exchanged for cash. Financial institutions must maintain sufficient liquidity to meet their payment and funding obligations.

Herstatt
The creation of CLS was a collective response to the turmoil that followed the failure of Germany's Herstatt Bank on 26 June 1974, which highlighted the counterparty risk inherent in the system of multilateral net settlement through which forex transactions were executed at the time.

Haircut
The percentage increase of a negative currency balance or reduction of a positive currency balance. It is based on the volatility of the historic FX movements in the applicable eligible currency and other risk modelling factors.

Split
The process by which large FX instructions (those that breach the currency splitting threshold) are split/broken down into smaller components to facilitate settlement.

Spot
An FX spot transaction is an agreement between two parties to exchange one currency for another for near-immediate delivery at the current market price, typically within two business days after the trade date (T+2).

Swap
An FX swap is an agreement between two parties to exchange currencies at one date and reverse the exchange at a later date, usually at a pre-agreed rate.

Value
Settled ‘Value’ basis. Settlement value is the total value of FX payment instructions settled through CLSSettlement over a given period. In 2025, CLSSettlement settled an average daily value of USD8.1 trillion.

Volume
Settlement volume is the total number of FX payment instructions settled through CLSSettlement over a given period. In 2025, CLSSettlement settled an average of 1.3 million payment instructions each day.