CLS sees volume growth in November

Darren Sinden

Swaps remain by the far the most popular product for those using the CLS system. Swaps volume in November came in at $1.239 trillion representing the lions share of the turnover.

Global settlements and netting agency for interbank and institutional FX trading CLS Group has announced increased monthly volumes for November 2020.

Average daily trading volumes settled over the CLS network last month amounted to US$ 1.787 trillion which represented a 4.0% gain over the volumes posted in October when daily volumes averaged out at $1.707 trillion.

CLS saw growth in the volumes for Both FX spot and FX Swap transactions spot volumes rose by 15.70% month over month whilst Swaps activity increased by 3.10%.

Swaps remain by the far the most popular product for those using the CLS system. Swaps volume in November came in at $1.239 trillion representing the lions share of the turnover.

CLS is used by 70 of the worlds largest institution and it has more than 25,000, third party participants and the business settles transactions with an average notional value of some $5.50 trillion on a daily basis.

Among the 70 institutional members are Citibank, Bank of America, JP Morgan and Goldman Sachs, Barclays, BBVA, BNP Paribas, HSBC, Santander, Deutsche Bank and UBS, Whilst APAC members include OCBS, Mizuho, ANZ, DBS, MUFG and SMBC.

CLS was established 18 years ago and was originally formed with 39 members who netted and settled transactions in just 7 currencies but ist has grown steadily from there.

Netting of settlement balances in the FX markets through a central agent means that CLS members can enjoy reduced capital commitments and only need to settle the net of their total liabilities with CLS, rather than each and every transaction that they make. CLS is not a trade counterparty or clearinghouse and business is transacted away from CLS. However, these trades are booked confirmed and settled through it, if both parties to the trade are members.

Settlements and payments made across the system and final and irrevocable and in that respect, it resembles a blockchain. And indeed CLS provides its users with a distributed ledger platform, as well as trade monitoring tools to allow them to track processing and settlement progress and to manage counterparty exposure and intraday risk.

CLS has also expanded into new areas such as data, where it enjoys some unique niches, for example, it provides one of the few FX data sets which include volumes traded something that quant, algorithmic and technical trading systems find very useful. The lack of reliable volume stats has meant that traders have, in the past, had to rely on proxies or try to infer spot volumes from futures contracts turnover and open interest.

The shareholders of CLS are its members so the business is not likely to come up for sale, but it surely represents a roadmap for the likes of the CME and other exchanges who are trying to capture a larger slice of the FX pie, as to how that might be done.

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