CLS, a market infrastructure group delivering settlement, processing and data solutions, today announces the launch of CLSNow, a bilateral, same-day FX gross payment-versus-payment (PvP) settlement service. J.P. Morgan and Goldman Sachs are the first banks to go live on the service.
CLSNow enables banks to exchange currency positions with mitigated settlement risk on a near-real-time basis. Currencies offered include the Canadian dollar, euro, UK pound sterling, and US dollar. Additional currencies will be added over time. The service mitigates FX settlement risk, enhances liquidity management, and provides balance sheet benefits for banks. Currently, the average daily gross value that is settled in the same-day FX market, outside of CLSSettlement and across all currencies that settle in CLS, is approximately USD300 billion.
The launch of CLSNow comes at a time when, due to the tightening or neutral stance of central bank monetary policy as well as post crisis reforms, banks are looking for more efficient ways to manage their liquidity.
Impact on banks
CLS believe they have solved a growing need in banks today:
- Alan Marquard, Chief Strategy and Development Officer, said, “With traditional sources of intraday liquidity contracting, there is a growing need for a safe, intraday currency settlement service. The launch of CLSNow meets this need, further enhances settlement risk mitigation and is another example of how CLS is working to solve challenges for the FX industry."
Banks also believe that the new CLSNow service has reduced their risks:
- Scott Lucas, Head of Intraday Liquidity, J.P. Morgan said, "Removing risk and improving availability of intraday liquidity are central to providing a best-in-class offering to our clients. The go-live of CLSNow is a significant step for the industry and can positively evolve the same day market by delivering these risk and liquidity benefits. We are delighted to have helped develop, and be a first adopter of, the new service.”
Impact on corporates
This is new facility has no direct impact on corporates, other than the banks management liquidity management improves. The key benefits of CLS for corporates remain:
- funding requirements reduced by more than 96% through multilateral netting
- reduced settlement risk and improved efficiency
- providing the insights for corporates to improve their trading strategies.
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