Third-party CLS Services - an effective way to reduce FX settlement risk

Doug Gardner and Mark Cipollina discuss several third party CLS connectivity options which are now available.

First Published: e-Forex Magazine 19 / Features / July, 2005

Doug Gardner and Mark Cipollina are Senior Engagement Managers at Random Walk Computing dgardner@randomwalk.com mcipollina@randomwalk.comThe advantage of Continuous Linked Settlement (CLS) in eliminating FX transaction settlement risk has become increasingly apparent. A network of member banks, operating through CLS Bank International, is processing an ever-increasing volume of business. CLS has arisen from the need to mitigate and quantify risk. Its success is attributable to the confluence of increased FX trading volume, the widespread adoption of straight through processing, improvements in technology and the geographic distribution of trading partners. Settlement is done on a payment versus payment basis and is irrevocable. As a result, the reduction of settlement risk has ensured higher levels of stability throughout the global FX market.However, becoming a CLS member bank has high costs. Additionally, for many firms involved in FX trading, the technology investment for CLS connectivity may be...continued

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