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Screenshot of a breaking news alert e-mail from Q2 2017
CLS, a provider of settlement services for the Forex market, today announced that it is partnering with LCH.Clearnet, an international multi-asset clearing house, to develop a service to facilitate the settlement of cleared FX products.
The new service will be open to all central counterparties (CCPs) and will apply to a variety of cleared FX products, such as OTC and exchange-traded Forex options, Forex futures and cross-currency swaps. The service will offer a specialized payment-versus-payment (PvP) settlement in all CLS-eligible currencies and will operate separately from CLS’s main PvP settlement service.
The service will provide a set of risk benefits to industry participants. For instance, in case a clearing member fails, payment netting will markedly cut the size of the participating CCP’s potential liquidity shortfall, mitigating systemic liquidity disruption. The service is designed to work on an all-or-nothing settlement basis, which reduces the risk arising from partial or incomplete settlement.
CCPs using the service also will benefit from CLS’s expertise in monitoring and processing payment activity.
David Puth, CEO of CLS, comments:
“This is an important milestone in the continued development and safeguarding of the global foreign exchange market. We look forward to working in partnership with LCH.Clearnet, which is ideally placed to develop this service.
We have been working with the CCP community and other industry stakeholders to design and model the most effective way to mitigate settlement risk for cleared FX products. Settlement risk is one of the most significant risks in FX. Our priority is to mitigate this risk, while increasing operational efficiency through our technology and connectivity.”
Gavin Wells, Global Head of ForexClear, at LCH.Clearnet, comments:
“We are delighted to be working with CLS on this initiative. We continue to see increased demand from the market for FX clearing, as firms are keen to benefit from the associated capital efficiencies and improved risk management associated with clearing. The new CLS settlement service is integral to our plans to broaden our service offering by adding products involving physical FX settlement.”
CLS plans to launch the new service in 2016, subject to regulatory permissions.
To view the official press release, click here.