CLS Group, the firm responsible for settlement risk mitigation in foreign-exchange (FX) markets, has announced that it has gone live with T+0 settlement for the US Dollar and Canadian Dollar currency pair (USD/CAD).
Dubbed the Americas Same-Day Settlement Session (SDS), the service is offered alongside CLS's Main Settlement Session, on its own timeline, to get around cut-off points in the main session that had previously made same-day settlement problematic. Given that USD/CAD shares the same timezone, and same-day trades represent a large proportion of activity, members had been reportedly pushing for its introduction as a risk-management offering. 17 member banks will initially participate, and CLS is looking at the expansion of the service to include the Mexican peso at a later date.
"We have seen significant demand from our member banks for a service that mitigates settlement risk for same-day FX transactions," says David Puth, CEO at CLS Group. "By establishing an additional service that captures payment instructions submitted after customary CLS cut-off times, we are continuing to deliver on our mission to enhance financial stability by providing risk mitigation services to the global FX market. SDS is a major step forward in enhancing the risk mitigation, liquidity, operational and IT efficiencies delivered by CLS."
CLS Group was established in 2002 as a risk-mitigation utility in the FX markets, prompted in part by the collapse of Herstatt Bank on June 26, 1974, which resulted in losses for counterparties on FX transactions with the failed institution. Transactions are settled during a certain time window on a payment-versus-payment basis.
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