Marc Bayle de Jessé
Chief Executive Officer
Chief Executive Officer’s report
As we look back on 2023, I reflect on our strong operational performance, solid financial position and our broader contribution to the FX ecosystem.
We remain committed to further enhancing efforts to provide high levels of resilience for the future. This includes continuing to invest in technology and infrastructure enhancements, resilience, cybersecurity and effective risk management.
Our products have seen sustained growth in volumes and values. CLSSettlement reported an average daily settled value of over USD6.6 trillion in 2023, with a new record value settled of USD16.0 trillion on 20 December, surpassing the previous record of USD15.0 trillion. The funding required to settle the record value was just USD78 billion, resulting in significant capital and liquidity savings for our clients and the wider FX ecosystem.
CLSNet has also achieved substantial success. The average daily notional value of net calculations consistently exceeded USD115 billion in 2023, and in December reached a record of USD445 billion netted. In the latter part of 2023, trades involving emerging market currencies accounted for 70% of total instructions in CLSNet. This highlights the fact that the platform goes some way to reducing the settlement and operational risk associated with trading these currencies. Three additional institutions – BNY Mellon, ING and Taipei Fubon Bank – committed to implementing CLSNet and our growing CLSNet community now includes eight of the top ten global banks.1
“Our partnership approach with our settlement members, the asset manager community and other market participants highlights the fundamental role CLS plays in the FX ecosystem and our ongoing dedication to making the market as resilient as possible.”
Throughout 2023, CLSNet received extensive recognition, winning the “Market Infrastructure Project of the Year” at the Global Custodian Leader in Custody Awards, “Best FX Clearing and Settlement Provider” at Euromoney’s FX Awards and “Best Settlement Initiative” at the FX Markets e-FX Awards.
Other CLS services have also experienced increased uptake. Our cross currency swaps (CCS) service saw continued growth during 2023, with a 48% year-on-year increase in the values and the addition of new CCS members, including Barclays Bank and Danske Bank. CLSMarketData also continued to see strong year-on-year growth with revenue growth of 51%.
The overall growth of our products and services contributed to revenues of GBP277 million – representing an increase of 9% compared to the same period last year. Whilst overall profit before tax at GBP2.6 million was lower, our cash and investments increased year-on-year as we continue to focus on financial prudence and maintaining a capital position well in excess of regulatory requirements in addition to our investment priorities.
The current geopolitical environment poses a distinct challenge for global regulators and policy makers in delivering reform on a global scale, and therefore settlement risk remains a cause for concern. This risk is evident in several key emerging markets currencies where growth in trading is outpacing G10 currencies. We remain actively engaged with the FX ecosystem, our settlement members, policy makers and the broader market through various forums. This enables us to explore practical solutions to support the efforts of market-wide initiatives to reduce settlement risk in the context of the Financial Stability Board’s G20 Cross-Border Payments roadmap and the FX Global Code, which is due to be reviewed in 2024.
Another challenge facing the industry is the shortening of the US and Canadian securities settlement cycle from T+2 to T+1 in May 2024. This transition will impact cross-border business because the FX component of the transaction must be settled prior to the T+1 settlement of the security. At CLS, we have and will continue to engage extensively with both buy- and sell-side market participants to understand the challenges posed by T+1 securities settlement and explore how our services can support the market.
We continue to explore innovative technologies that could help reduce risk and increase efficiency, whilst also meeting our high standards of resilience. Our efforts are multi-faceted and range from internal research to participating in industry initiatives, for example the cross-currency impact of central bank digital currencies.
Our partnership approach with our settlement members, the asset manager community and other market participants highlights the fundamental role CLS plays in the FX ecosystem and our ongoing dedication to making the market as resilient as possible. In 2023, we established the Market Advisory Forum, which provides opportunities for me and my colleagues to discuss personally and directly with settlement members the topics causing them the most concern. These meetings will continue throughout 2024 and beyond.
Lastly, I would like to highlight the progress we have made on our environmental, social and governance (ESG) agenda. Our focus on ESG has resulted in the establishment of a sustainability network, an in-depth benchmarking study of our ESG practices and the publication of our Sustainability Statement.
Our employees are our strongest asset and we are therefore proud of our recognition by The Sunday Times as one of the best places to work in 2023. This recognition showcases our commitment to various aspects of inclusivity and to delivering a wide range of initiatives that support our employees’ sense of belonging, emotional and mental wellbeing.
As we navigate the challenges of the global landscape in 2024, our overall strategy remains unchanged. We will continue to engage with the ecosystem to explore solutions for mitigating settlement risk, particularly for emerging market currencies. We remain committed to driving adoption of our services, investing in our products, resilience and infrastructure, and delivering exceptional service across our entire product range. Our focus on investment, balanced with financial prudence and maintaining a strong capital base will ensure our continued success.
Marc Bayle de Jessé
Chief Executive Officer
1 According to the 2022 Euromoney Foreign Exchange Survey
