CLS Bank is investigating the cause of a technical problem that affected the settlement window for Asia Pacific currencies yesterday, resulting in a failure to settle thousands of Australian dollar and Yen payment instructions.
The glitch meant that banks settling through the CLS Bank - introduced to cut temporal risk in cross-border currency trading - had to resubmit instructions for settlement today. CLS is not commenting on speculation - as reported on City rumourwire angrytowers - that the system software simply ran out of disk space, causing data storage failures as the Asia Pacific window for settlement was closing.
CLS' banking shareholders claim responsibility for 80% of the world's foreign exchange business by value. The idea to build the system was first mooted in the mid-1990s but it suffered successive technical hiccups - most notably in 2001 when a live launch planned for October was delayed at the last minute due to problems in testing IBM-supplied software.
The system finally went live in September last year and has reported a steady pick-up in volumes. In one day in February, CLS Bank settled over 117,000 payment instructions with a gross value of over $1 trillion for the first time.
The latest technical hitch is a huge embarrassment for CLS and its backers, who have talked of extending the system to settle money market trades and cross-border payment for securities. Central bankers, already uneasy with the liquidity management issues raised by the introduction of the system, will need to be further reassured about the operational stability of the platform before green-lighting expansion into other markets.