CLS Group plans to launch a same-day settlement service in the second half of 2018, subject to regulatory approvals.
The new service, CLSNow, will offer bilateral, same-day, payment-versus-payment gross settlement in CAD, CHF, EUR, GBP and USD, with plans to extend the service to additional currencies in the future, based on client demand. The aim is to enable counterparties to optimise the use of available liquidity in the same-day market, while mitigating settlement risk.
Currently, some of CLS’s largest clients have in excess of 10% of their daily euro business being transacted on a same-day basis, and the expectation is that the launch of CLSNow will further facilitate the growth of this same-day market.
“This is without question the most important product launch on our horizon right now,” David Puth, CEO of CLS, tells Profit & Loss. “When you think about it logically, why should there be a T+2 market at a time when money can move instantly and in the FX market, money can also settle almost immediately?”
Puth emphasises that CLSNow isn’t just aimed at developing the same-day market though. He says that it can also benefit corporate treasurers that need to move money quickly to different jurisdictions by enabling them to do so safely. In addition, Puth claims the service could help banks significantly reduce the capital charges associated with various exposures and transactions to which they’re currently subject.
Looking ahead, Puth predicts a broader move towards real-time settlement for FX products. “My expectation is that the FX market will move fully to a T+0 environment over the next decade, and I think that the launch of CLSNow is the first major step in facilitating that growth,” he says.
CLS has 12 clients that have signed letters of intent to go live on the new service in the fourth quarter of 2018. In addition to same-day settlement, CLS also announced two other new services that are set to go live in 2018.
CLSTradeMonitor is a post-trade monitoring and reporting tool that will provide a real-time consolidated view of the match and confirmation status for all trade instructions submitted to CLSSettlement and CLSNet (a bilateral payment netting solution for trades not eligible for CLSSettlement, that is being built on a distributed ledger technology platform, but not yet available).
Trade status details are available across all CLSSettlement providers and counterparties. The combined solution aims to enable participating institutions to drive process efficiencies such as optimising intraday liquidity, enabling real-time awareness of currency and counterparty exposures, and reducing operational and credit risk. Both CLSNet and CLSTradeMonitor are expected to be available in the first half of 2018, subject to the necessary regulatory approvals.
The firm is also launching a new data service, CLS Data. Subscribers to this service will receive reports detailing FX spot volumes, pricing and order flow on an intraday, daily and/or end-of-day basis, depending on requirements.
Included in these reports will be CLS intraday FX spot volume, which will provide hourly executed FX spot trade volume data in 33 currency pairs, and CLS FX order flow data, which will provide aggregated FX spot order flow data showing directional volume by counterparty type, market maker vs non-market maker, and/or net directional volume for all parties. The reports will also include CLS FX pricing daily report provides aggregated spot prices with enhanced Volume Weighted Average Price (VWAP) and Time Weighted Average Price (TWAP) values to support best execution analysis.
“We are now entering the data market space in a very comprehensive way. Our data set offers an unparalleled view of the FX market. We are now creating a data product that will give our clients tools to help them monitor market activity in a very different way and also help them understand what is going on in the broader market place. I think that you’ll see a real evolution in this set of data products over the next several years at CLS,” says Puth.