CLSNet onboards Deutsche Bank, Mashreq and Standard Chartered

abdelaziz Fathi

FX settlement specialist CLS Group today announced that Deutsche Bank, Mashreq and Standard Chartered are at various stages of onboarding to CLSNet, the foreign exchange bilateral payment netting system for emerging currencies.

CLSNet service covers approximately 120 currencies and the three banks are joining its growing community of global and regional financial services institutions, which includes seven of the top ten global banks. The solution 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.

The milestone comes as part of a broader strategy that aims to shake off CLS’ image as a traditional settlement services provider. To date, most of the updates to CLS products were enhancements of existing services intended to make the offering more efficient.

Instead, the company, which was formed in 2002 to reduce FX settlement risks, recently has been keen to promote itself as a provider of innovative products, including post-trade risk management, aggregation and netting solutions.

Lisa Danino-Lewis, Chief Growth Officer, CLS said: “The addition of Deutsche Bank, Mashreq and Standard Chartered demonstrates the appeal of CLSNet to all market participants exploring ways to mitigate settlement risk, reduce operational costs and optimize liquidity for their post-trade FX trading processes. Given the sharp focus on settlement risk mitigation across the industry, CLS is collaborating with market participants to further evolve CLSNet and to facilitate adoption for a wide range of participants.”

Mark Edwards, Group Head of Operations, Mashreq added: “CLSNet will enable us to not only mitigate risk and improve efficiency, but also optimize liquidity and reduce funding requirements for our front office. This is an exciting proposition that will deliver significant benefit for our institution and the broader FX ecosystem. Participating in CLSNet also supports Mashreq’s adherence to the principles of the FX Global Code.”

Paul Scott, Managing Director, Financial Markets Operations, Standard Chartered commented: “We are delighted to be part of the growing network exploring with CLS risk mitigation via automated payment netting calculations, while providing an enhanced settlement offering for our clients and benefiting from significant operational efficiencies. We also support efforts to address systemic risk in the broader FX market, and so welcome the opportunity to collaborate with CLS to achieve this.”

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