CLS to develop payment netting service
CLS: DLT for everyone in FX!
CLS Group has started building a payment netting service, using existing message protocols and distributed ledger technology (DLT), which will be open to all FX market participants – not just CLS members –and will also enable CLS members to net some FX trades that are currently settled outside the CLS settlement service.
CLS Netting, scheduled to go live in 12-18 months, will provide the FX market’s first standardised payment netting process for trades settled in a total of 24 currencies – the 18 currencies currently settled by CLS today, plus an additional six non-CLS eligible currencies.
Speaking to Daily News at Sibos, Alan Marquard, chief strategy and development officer at CLS, said: “While some of the larger banks have developed bilateral netting services themselves, this is the first time a solution has been presented that will coalesce the market around standards, reducing risk and cost in the FX market. This will not only bring the benefits of netting to a wider audience, but also will deliver greater value to CLS members in being able to net with non-CLS market participants.”
Of the 14 early adopters committed to go live with CLS Netting at launch, three are non-CLS members – Banco Actinver and two buy-side market participants, Goldman Sachs Asset Management and Neuberger Berman. Further firms from both within CLS and elsewhere are expected to come on board within the next year.
CLS will build the DLT platform for CLS Netting using Hyperledger Fabric, an industry-accepted, open-source solution. It will also work in collaboration with its technology partner IBM to help ensure that the platform meets the requirements necessary for delivering a resilient, secure, and scalable service.
Using the new system, participants will be able to submit FX instructions over existing Swift-based channels, or by connecting directly to the platform via the highly secure, permissioned distributed ledger, administered by CLS.
