CLS Bank International has completed the first stage of live trials to make continuous linked settlement (CLS) available to the foreign exchange market.
CLS aims to eliminate the temporal risk for foreign exchange settlement by streamlining the settlement process between seven of the world's central bank payments systems. It is anticipated that a settlement process that may stretch over days will be replaced with a real-time five hour funding, settlement and payment window.
After suffering successive setbacks due to technical hitches, CLS Bank says it has now conducted end-to-end trials with eleven pilot shareholder banks processing real value instructions for payment. These were Bank of America, Bank of New York, BNP Paribas, Barclays Bank, Credit Agricole, Commerzbank, Deutsche Bank, HSBC Bank, National Australia Bank, Société Générale and UBS.
The trials involved all seven central bank RTGS systems linked together in real-time. According to the bank, 80 per cent of the payment volumes expected in full live operation were handled by the system.
An additional 28 shareholders participated in separate payment trials and met all requirements.
This month, CLS Bank will conduct futher trials to ensure banks wishing to become members of its settlement service can manage the operational requirements of the CLS Settlement.
Suzanne Labarge, chairperson of CLS Group, says: "After stringent testing and operational review CLS has proved the effectiveness of its settlement service. We are moving to wholly new operational and liquidity management procedures and CLS Bank has demonstrated it has the processes and skills to make them work."
Joseph De Feo, president and chief executive officer of CLS Bank International, adds: "We are linking many of the world’s central banks, commercial institutions and their agents in one CLS 'eco-system'...Our technical and operational testing must meet the highest standards."