CLS reports meteoric 67.8% surge in FX Forwards trading

Rick Steves

Additionally, FX spot volumes rose by 21.5%, while FX swap volumes experienced an 8.3% increase.

CLS has reported a significant uptick in foreign exchange trading activity for December 2023. The average daily traded volume surged to $1.97 trillion, marking a 15.2% increase year-over-year.

Breaking down the data, the foreign exchange market saw notable rises across various instruments. FX forward volumes soared by an impressive 67.8%, indicating a robust appetite for hedging and speculative strategies among market participants. Additionally, FX spot volumes rose by 21.5%, while FX swap volumes experienced an 8.3% increase.

  • FX Forwards climbed from $0.107 trillion in December 2022 to $0.180 trillion in December 2023.
  • FX Swap also saw an increase from $1.190 trillion to $1.289 trillion in the same timeframe.
  • FX Spot, which is indicative of immediate currency demand, increased from $0.409 trillion to $0.498 trillion.

Overall, the total average daily traded volume submitted to CLS has risen from $1.706 trillion in December 2022 to $1.967 trillion in December 2023, according to the report.

CLS has highlighted that the numbers may not add up precisely due to rounding and that the inclusion of the EURHUF pair from February 2023 may slightly alter the reported percentages for FX swap volumes compared to previous figures.

CLSNet onboards BNY Mellon and ING

The FX settlement specialist yesterday announced it onboarded BNY Mellon, the world’s largest custodian bank and ING, the largest Dutch bank, to CLSNet, the foreign exchange bilateral payment netting system for emerging currencies.

CLSNet service covers approximately 120 currencies and DB is joining its growing community of global and regional financial services institutions, which includes eight of the top 12 global banks. The centralized platform was originally built with IBM using the Hyperledger Fabric enterprise blockchain.

Using CLSNet helps FX market participants adhere to the FX Global Code – the industry’s global principles of good practice for the FX market. Instead of settling every transaction individually, automated netting reduces the required margins, leaving more funds available for other purposes. As such, the solution helps increase liquidity, reduce counterparty risk and costs of manually calculating netting or settling a higher volume of transactions. Plus, the cost of settling emerging market currencies tends to be relatively high.

CLSNet has seen record growth this year, indicating strong industry support for the service. The platform reported the average daily notional value of net calculations consistently at more than $115 billion over the last 12 months. A notable peak was reached on December 20, 2023, when the service recorded a daily notional high of $445 billion netted, marking a remarkable milestone in its operation.

CLSNet standardizes and automates post-trade matching and netting processes across the global currency spectrum. As market participants continue to focus on the risks associated with post-trade processing and settlement in currencies outside of CLSSettlement, CLSNet offers standardization and automation through a single platform which mitigates risk, reduces operational costs and optimizes liquidity for these currency flows.

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