MUFG / CLSNet
MUFG has reduced the number of payments and funding required for settlement
* By settling net payment amounts calculated by CLSNet
FX Operations department
Industry issue:
Aligning with aspects of the FX Global Code was challenging due to the settlement risk associated with segments of the market not currently covered by PvP, like emerging market currencies.
MUFG had previously relied on gross settlement methods with its counterparties, some of which were participants in CLSNet. This required settling each transaction individually, which increased the likelihood of settlement failures.
When a failure occurs, resolving it can be time-consuming and costly, leading to inefficiencies and operational risk. Even a few unmatched trades can prevent the processing of all transactions and delay settlement.
Our solution:
The automated and centralized features of CLSNet enable MUFG to implement solutions that reduce settlement risk for non-CLSSettlement eligible currencies and more directly support its adherence to the FX Global Code. CLSNet’s implementation has standardized MUFG's netting calculation processes and has exceeded initial expectations for operational efficiencies.
In addition, MUFG can now quickly identify and resolve trade exceptions that previously caused delays to settlement. This improvement is crucial for enhancing MUFG’s intraday liquidity management, especially in light of evolving market conditions and ongoing volatility in the FX market.
Client benefits:
- By settling net payment amounts calculated by CLSNet, MUFG experienced a 92% reduction in the number of payments and a 43% decrease in funding requirements
- Internet-based API connectivity for outbound messages, enabled simpler integration and full automation of the previously manual netting calculation processes
- Reduced number of communications required to confirm positions prior to settlement, leading to lower operational risk
- Reduced overdraft costs and correspondent bank charges.