LONDON, November 28, 2018 /PRNewswire/ --
CLSNet brings a bilateral payment netting service to over 120
currencies, optimizing intraday liquidity, improving operational
efficiency, and reducing risk
Built in conjunction with IBM, it is the first global FX
market enterprise application running on blockchain in
CLS today announces that CLSNet, a standardized, automated
bilateral payment netting service for over 120 currencies operating
on a distributed ledger technology (DLT) platform, is now live with
Goldman Sachs and Morgan Stanley. Six additional participants from
North America, Europe and Asia, including Bank of China (Hong
Kong), have committed to joining the service, with a steady
onboarding of several other market participants planned in the next
The service has been developed for, and in collaboration with,
buy-side and sell-side institutions. CLSNet has been designed to
standardize and increase the levels of payment netting in the FX
market for trades not settling in CLSSettlement. By standardizing
and automating the calculation of payment netting, CLSNet can
reduce costs for market participants and increase liquidity in FX
markets. The service also supports compliance with certain
principles of the FX Global Code of Conduct.
Commenting on the launch, Alan
Marquard, Chief Strategy and Development Officer, CLS,
said, "We are excited to be launching CLSNet, the first service of
its kind to be operated on a DLT platform. Further, this offering
demonstrates how we are using our unique, trusted position at the
center of the FX market to solve industry challenges.
"A standardized and automated payment netting process will lead
to improved intraday liquidity, reduced cost, improved operational
efficiencies and ultimately support business growth."
Currently, a lack of standardization and automation introduces
risk and operational inefficiencies for market participants. A
limited number of participants currently net with each other on a
regular basis, however these processes often have manual
intervention and are not fully standardized or scalable. The impact
of limited payment netting is exacerbated by the high settlement
costs associated with emerging market currencies, despite their
increased relevance for FX market participants.
Further, there are many FX market participants that do not net
the payments in respect of FX trades, instead choosing to settle on
a gross basis. These gross payments have full exposure to
settlement risk, resulting in higher intraday liquidity demands and
causing institutions to hold more capital.
CLSNet was built in conjunction with IBM and runs on the Linux
Foundation's Hyperledger Fabric blockchain framework. CLS's
collaboration with IBM has produced valuable insights into the
benefits that DLT can bring to post-trade processes. CLS will use
the knowledge and experience gained from building this service on
DLT architecture as it looks to create greater efficiencies and
reduce costs for clients.
Adam Josephart, Managing
Director, Fixed Income Division, Morgan Stanley, said, "CLSNet
will deliver the standardization and automation needed for non-CLS
settled transactions. We are delighted that Morgan Stanley is one
of the early adopters of the service."
Barry Lo, General
Manager, Bank-wide Operation Department of Bank of
China (Hong Kong), said, "We take great pleasure
in participating in CLSNet, which will enhance operational
efficiency in trade matching and payment netting for non-CLS
settled currencies such as CNH, and strengthen our risk management.
This underscores our strong commitment to driving Fintech
innovation and represents a major step forward in the application
of new technology in our businesses."
"Since we first pioneered the use of blockchain in the FX market
nearly three years ago, IBM has been working hard with CLS on the
development and deployment of CLSNet as the first post-trade
production deployment of blockchain technology in a global market
utility," said Marie Wieck,
General Manager, IBM Blockchain. "With CLSNet now in production
with two of the world's largest banks, for a major market function,
it is a testament to the ongoing maturity of blockchain technology
and the value that it can deliver in practice."
CLS helps clients navigate the changing FX marketplace - reducing
risk and creating efficiencies. Our extensive network and deep
market intelligence enable CLS specialists to lead the development
of standardized solutions to real market problems.