Trevor Suarez
Chief Financial Officer
Chief Financial Officer’s Report
As a global market infrastructure at the center of the FX ecosystem, we must maintain a strong capital position, balanced with appropriate investment to ensure we operate to the highest levels of financial and operational resilience.
While we have always maintained exceptional service levels, the current market conditions and the ever-changing geopolitical and economic landscape have heightened the industry’s focus on resilience. To navigate this uncertainty, FMIs like CLS have a vital role to play and it is crucial that we maintain our focus on investing in our infrastructure, resilience, risk and control functions and the evolution of our products.
Within this context, I would like to provide an overview of our financial performance. In 2023, Profit before Tax was GBP2.6 million, a decrease compared to GBP9.2 million in 2022. Whilst revenues increased, in part due to higher tariffs, we also consciously increased the level of our investment to maintain the highest levels of operational resilience and further strengthen our cybersecurity posture
“Our financial performance was underpinned by record levels of activity in CLSSettlement, a focus on cost management and careful management of our balance sheet. Revenue for 2023 amounted to GBP277 million, representing an increase of GBP23 million compared to 2022. ”
Chief Financial Officer
Despite the decrease in profit, I am pleased to report that cash and investment balances increased to GBP230 million compared to GBP202 million in 2022. Whilst these balances are well in excess of the minimum regulatory requirement, internally we have chosen to hold an additional amount of capital over and above regulatory capital in the form of ‘Risk Capital’, which reinforces our commitment to ensuring
financial resilience.
Our financial performance was underpinned by record levels of activity in CLSSettlement, a focus on cost management and careful management of our balance sheet. Revenue for 2023 amounted to GBP277 million, representing an increase of GBP23 million compared to 2022. CLSSettlement remains the most significant contributor to overall revenue, driven by payment instruction volumes, average daily settled values increasing from USD6.5 trillion in 2022 to USD6.6 trillion in 2023 and a tariff increase. In addition, third-party participants using CLSSettlement continued to be strong with more than 35,000 using the service.
Beyond CLSSettlement, we saw strong performance for our other products. CLSNet, our automated bilateral payment netting calculation service, continued to experience significant increases in adoption in 2023, with the average daily notional value of net calculations consistently exceeding USD115 billion.
The increased demand for the service resulted in revenues more than doubling in 2023. Though small in comparison to CLSSettlement, it aligns with our key priorities of helping market participants optimize efficiency in their post-trade processes and effectively address settlement risk for currencies not eligible for CLSSettlement, particularly emerging market currencies.
We also saw good revenue growth in our CLSMarketData products, as market participants sought to enhance their understanding of market liquidity and risk positions.
Operating expenses for 2023 increased to GBP280 million (GBP245 million in 2022), with significant and increased investment spread across key areas including resilience, risk and controls, cybersecurity and infrastructure enhancements.
Offsetting this to some extent, was a strong increase in interest income received of GBP6 million (GBP0.8 million in 2022) from our cash and investment portfolio. This increase is due to the benefit of higher interest rates, where appropriate. While interest rates remain elevated, we can expect a similar return from our portfolio.
Looking ahead to 2024, we will continue to invest heavily in enhancing our resilience, technology capability, risk and controls and cybersecurity capabilities. As a critical service provider to the FX market, we uphold the highest levels of operational resilience above all else, and maintaining these levels will continue to be our top priority.
We will do this in a measured and controlled manner, ensuring we remain financially resilient by maintaining a strong capital position at all times.
Trevor Suarez
Chief Financial Officer
