Sell-Side Technology Awards 2016: Best Infrastructure Provider to the Sell Side — CLS

CLS, the New York and London-based provider of settlement risk mitigation to the global foreign-exchange (FX) market, has proven to be exactly that.

The markets were particularly volatile back in January 2015 after the Swiss National Bank removed the Swiss franc’s floor against the euro. Despite the panic the action caused, the post-trade FX ecosystem was able to continue without interruption thanks largely to CLS, which processed 2.26 million transactions that day.

Time and again, CLS has proven to be reliable and dependable in the FX community. Currently, 64 financial institutions serve as settlement members and are direct participants in CLS, according to David Puth, CEO of CLS, and over 20,000 third-party clients globally use CLS’ services indirectly through its settlement partners. “CLS mitigates settlement risk by simultaneously settling the payments on both sides of an FX trade on a real-time basis,” Puth says. “It does this by using a unique payment-versus-payment (PvP) settlement service, which is linked to the real-time gross settlement (RTGS) systems of the 18 currencies eligible for CLS settlement. The settlement of these payments across the books of CLS is final and irrevocable.”

CLS took part in three initiatives in 2015 that demonstrate its desire to meet its clients’ evolving needs. First, it added the Hungarian forint as the 18th currency on the CLS platform, which marked the end of two years’ work with Hungary’s central bank, regulators and settlement members, according to Puth.

Second, it teamed up with TriOptima during its launch of the triReduce CLS Forward FX Compression service, which allows counterparties to reduce the size of outstanding portfolios without fundamentally changing their market positions. Users also get reduced operational risk, counterparty exposure and credit risk, improved leveraged ratios, enhanced capital efficiency and better regulatory compliance, according to Puth. And finally, it formed a partnership with Markit to create its PvP settlement solution in CLS for cross-currency swaps, which mitigates settlement risk, increases operational efficiencies, and reduces liquidity and payment demands.

The markets were particularly volatile back in January 2015 after the Swiss National Bank removed the Swiss franc’s floor against the euro. Despite the panic the action caused, the post-trade FX ecosystem was able to continue without interruption thanks largely to CLS, which processed 2.26 million transactions that day.

“Global regulators remain keen to see the industry make further progress on mitigation of settlement risk, as demonstrated in the guidance from the Basel Committee on Banking Supervision, which promotes the use of payment-versus-payment arrangements to reduce settlement risk,” Puth says. “CLS continues to demonstrate its commitment to maintaining stability and trust in the FX market. The company is an integral part of the FX market and will continue to play a vital role in providing risk mitigation services to enhance financial stability and underpin confidence in the market.”