Increased flows of cross-currency swaps to CLSSettlement supports FX industry calls to increase payment-versus-payment settlement

Increased flows of cross-currency swaps to CLSSettlement supports FX industry calls to increase payment-versus-payment settlement

CLS, a financial market infrastructure delivering settlement, processing and data solutions across the global FX ecosystem, and IHS Markit, a world leader in critical information, analytics and solutions, today announced that HSBC has joined the cross-currency swaps service. There are now nine settlement members live on the service, including some of the world’s largest banks.

Increasing cross-currency swap flows to CLSSettlement supports the call from policymakers and regulators to increase payment-versus-payment (PvP) adoption across the industry in order to mitigate settlement risk. There has been a clear trend in FX markets in recent years – the rise in global trading of currencies that do not have payment-versus-payment (PvP) settlement mechanisms. To address this issue, international standard setting bodies, such as the CPMI and the Global Foreign Exchange Committee, are exploring ways to increase the level of PvP settlement in the FX market.

The service is an extension of CLS’s unique PvP settlement service and uses the MarkitSERV trade confirmation platform to allow CLSSettlement members to send their cross-currency swaps into CLSSettlement for settlement. The cross-currency swap flows are multilaterally netted against all other FX transactions in CLSSettlement, resulting in a significant reduction in daily funding requirements for clients and considerable liquidity optimization benefits across the industry.

Lisa Danino-Lewis, Global Head of Sales at CLS said: “We are delighted to welcome HSBC as the latest participant to join our cross-currency swaps service. As more settlement members join the service, they will benefit from significant operational and funding efficiencies. CLS has long advocated for greater PvP adoption to mitigate FX settlement risk, and by increasing cross-currency swap flows to CLSSettlement, HSBC’s participation will help to achieve that.”

Peter Altero, Global Head of Rates Business Development at IHS Markit added: “The cross-currency swaps settlement service is a good example of how service providers can work together to create a more efficient FX settlement system. The addition of HSBC to the community of global financial institutions connected by the MarkitSERV network for cross-currency swap settlement shows that the industry supports such collaborations, while at the same time reaping cost benefits and mitigating risk.”