CLSNet reports record $100 billion in average daily turnover

abdelaziz Fathi

FX settlement specialist CLS Group today announced that CLSNet, its foreign exchange bilateral payment netting system for emerging currencies, platform witnessed continued growth.

In August 2022, the group reported a record $100 billion in the average daily notional of net calculations in CLSNet. The milestone marks an increased adoption from market participants and follows the 179% year-on-year increase in the average daily notional of net calculations in H1 2022.

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.

Most recently, Deutsche Bank, Mashreq and Standard Chartered were reportedly at various stages of onboarding to CLSNet. The increasing number of global and regional banks joining the CLSNet network demonstrates its appeal to market participants exploring ways to mitigate settlement risk, reduce operational costs and optimize liquidity for their post-trade FX trading processes.

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.

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.

CLS Group, which provides risk mitigation and settlement services for FX dealers and institutions, has shifted its reporting methodology for FX data in 2018. The figures are now reported based on one side of FX transactions and only one of the four legs of FX swap trades, in line with BIS standards and Foreign Exchange Committee market reports, and thus it avoids double counting the total amount of trades.

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