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Deutsche Bank joins CLS’s bilateral netting calculation service, CLSNet
Deutsche Bank has gone live on CLS’s bilateral payment netting calculation service for over 120 currencies – CLSNet. With the addition of Deutsche Bank, the CLSNet community now includes eight of the top 12 global banks.
The service has seen a marked increase in adoption over the past year, with a year-on-year increase of over 400% in the average daily volume of net calculations in Q1 2023. This reflects the industry's growing need for risk reduction, operational efficiency and liquidity optimization. On 21 June 2023, the service reached a record daily notional of USD306 billion netted in the service, highlighting its network effect. As the CLSNet community continues to grow, users of the service will increasingly benefit from the expanding roster of netting counterparties.
Designed to standardize and centralize post-trade processes for over 120 currencies across various trade types, including same-day trades and NDFs, CLSNet helps market participants to reduce risk and achieve greater operational efficiency for a broad range of currency flows. Settlement risk in the FX market continues to be an area of focus, especially in emerging market currencies and other growing segments of the market. As such, market participants are looking for ways to mitigate risk effectively.
Lisa Danino-Lewis, Chief Growth Officer, CLS, commented, “We are delighted to announce that Deutsche Bank has gone live on CLSNet. With our network expanding globally, participants are experiencing significant improvements in liquidity optimization, operational efficiencies and risk mitigation. CLSNet is directly accessible to most market participants, ensuring that the benefits of the service are widely available to the FX industry.”
David Gary, Head of FX Trading North America, Deutsche Bank, added: “Joining CLSNet is a logical progression in our continued growth strategy and commitment to promoting the effective functioning of the wholesale FX market. This move offers us not only the advantages of liquidity optimization and risk mitigation, but also the added benefit of streamlined post-trade matching and netting processes, making our operations even more efficient.”
“This move offers us not only the advantages of liquidity optimization and risk mitigation, but also the added benefit of streamlined post-trade matching and netting processes”
CLSNet also supports FX market participants’ adherence to the updated FX Global Code, particularly to Principles 35 and 50,1 as all trade instructions sent to CLSNet are validated and matched up to the pre-determined cut-off times between counterparties for each currency. This ensures that only matched trade instructions are included in the automated net calculation and that there is a single common record of the net payment obligations. By automating the netting process via a centralized platform, users benefit from greater operational efficiency and increased risk mitigation for currencies that are not currently eligible for CLSSettlement.
1. Principle 35 provides that market participants should reduce their settlement risk as much as practicable and encourages the use of automated settlement netting systems. Principle 50 provides that market participants should properly measure, monitor and control their settlement risk and includes recommendations concerning the confirmation of bilateral net amounts and the agreement of predetermined cut-off points.