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Screenshot of a breaking news alert e-mail from Q2 2017
With the heightened focus on regulation, growing cross-border investment and reducing securities trade settlement cycles globally, provider of risk mitigation and operational services for the global FX market ClS has welcomed the initiative by the Financial Services Agency (FSA) to promote payment-versus-payment (PvP) settlement to mitigate settlement risk. This reaffirms Japan’s commitment to strengthening settlement and operational risk management and will help enhance growth in its domestic currency market.
This is in line with international regulatory guidelines from the Basel Committee on Banking Supervision, which stipulates the use of a PvP system by banks where practicable.
Japan is one of the world’s largest centers for currency trading and a crucial hub for the Asian foreign exchange (FX) community. In recent years it has benefitted from a significant increase in cross-border currency flow and foreign direct investment, but this has also increased exposure within a wider range of market participants including funds and their counterparties.
Participation in CLS would enhance risk management and operational efficiencies for those entities not using PvP to the same levels embedded within the trading operations of the larger banks.
Adoption of a PvP settlement system that can be used universally across commercial banks, trustees (on behalf of their pension and fund clients), and securities companies in Japan will result in consistent and robust risk management standards for all market participants and support growth in the Japanese currency market.