How it works

We protect our clients from settlement risk by simultaneously settling payment instructions relating to FX trades using our unique payment-versus-payment system.

When an FX trade eligible for CLSSettlement is executed by a settlement member or their customers, we receive electronic payment instructions for both sides of the trade. Our system authenticates and matches the information, which provides legal confirmation and stores it until the agreed settlement date.

On each settlement date, we simultaneously settle each pair of matched payment instructions that satisfy three risk management tests. At the start and end of a normal business day, each settlement member’s multicurrency account has a zero balance. The funding and pay-out of multilateral net positions is conducted using a daily, defined schedule and settlement members pay and receive funds through CLS’s central bank account in each currency via their own accounts or nostro bank accounts.

The settlement of payment instructions and the associated payments across the books of CLS Bank is final and irrevocable. Finality is one of the most important elements of CLSSettlement.

On an average day, we settle approximately USD5 trillion of payment instructions on behalf of our clients. However, the funding required to settle this amount is determined on a multilateral netted basis (where each settlement member only transfers the net amount of its combined payment obligations in each currency, while still settling the gross value of its instructions).

 

CLSSettlement overview