Deutsche Bank joins CLSNet bilateral payment netting system

abdelaziz Fathi

FX settlement specialist CLS Group has onboarded Germany’s biggest lender, Deutsche 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.

Lisa Danino-Lewis, Chief Growth Officer, CLS, commented, “We are delighted to announce that Deutsche Bank has gone live on CLSNet. With our network expanding globally, participants are experiencing significant improvements in liquidity optimization, operational efficiencies and risk mitigation. CLSNet is directly accessible to most market participants, ensuring that the benefits of the service are widely available to the FX industry.”

David Gary, Head of FX Trading North America, Deutsche Bank, added: “Joining CLSNet is a logical progression in our continued growth strategy and commitment to promoting the effective functioning of the wholesale FX market. This move offers us not only the advantages of liquidity optimization and risk mitigation, but also the added benefit of streamlined post-trade matching and netting processes, making our operations even more efficient.”

Over the past year, CLSNet has witnessed a remarkable surge in adoption with an impressive year-on-year increase of over 400% in the average daily volume of net calculations during Q1 2023. This substantial growth can be attributed to the financial industry’s increasing demand for risk reduction, operational efficiency, and liquidity optimization.On June 21, 2023, CLSNet achieved a significant milestone by recording a record daily notional of USD 306 billion netted in the service.

As the CLSNet community continues to expand with the addition of major financial institutions like Deutsche Bank, users of the service are poised to benefit even more. With a growing roster of netting counterparties, participants can expect increased efficiency, reduced risk, and enhanced liquidity management.

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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