CLS shelves plans to provide ruble settlement services – for now

For the first time since its establishment, FX settlement services provider CLS has postponed the addition of a currency to its ensemble.

In February this year, amid vast international interest in ruble liquidity, CLS announced plans to add the Russian sovereign currency to the existing 17 currencies for which it provides settlement, however as last week drew to a close, the firm has made a commercial decision not to proceed with the addition during November this year as had been previously anticipated.

CLS began its negotiations with the Central Bank of Russia two years ago, at a time when Canadian venue-neutral infrastructure provider TMX Atrium was engaged in installing point to point connectivity between Moscow, Frankfurt and London, reducing the latency significantly and assisting Western firms with greater access to ruble liquidity as Russia demonstrated interest in elevating its currency to the levels of majors.

Following postponement, CLS has not provided a new date for implementation, potentially leaving the door open for a domestic or Chinese company to take this step in place of CLS, which could come to fruition post-launch of an interbank transaction system between Russia and China which is provided by American multinational Swift.

A member notice which was distributed on September 5 read: “CLS and the Bank of Russia have agreed that an extension is needed to complete the outstanding tasks, in particular a review of mechanisms to facilitate payments related to the settlement of the ruble in CLS.”

The notice added that CLS would need to “analyse operational and other potential implications of sanctions to assure they do not impinge on CLS’s ability to provide its service”. A new go-live date for the ruble has not been set, the notice concluded.

Whether geopolitical influences had a bearing is perhaps a matter for discussion, however CLS does not cite this as a reason for its postponement, however it cannot be ruled out given the instantaneous effect national affairs can have on financial institutions and currencies in today’s electronic world. This was emphasized last week by Royal Bank of Scotland considering relocation to London should Scotland vote for independence from the United Kingdom. Such a relocation would be a push-button exercise as RBS is already a prominent firm in London’s financial district.

Similarly, with no infrastructural changes, CLS can add or withdraw its service to specific currencies in specific locations instantaneously, therefore passing the corporate prudency on to its customers.

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CLS shelves plans to provide ruble settlement services - for now


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