CLS Group (CLS), a leading provider of risk mitigation and operational services for the global foreign exchange (FX) market, today announced the first non-bank financial institution (NBFI) to join the CLS system via third party access in South Korea.
Samsung Securities, a leading South Korean securities company, is now settling FX transactions in CLS via its third party service provider, KEB Hana Bank - South Korea’s largest bank by assets.
Samsung Securities is the first NBFI to gain third-party access to CLS and marks an important milestone for both CLS and the South Korean FX market. In December 2014, the Bank of Korea, in consultation with the Ministry of Strategy and Finance, announced a rule change to expand the range of FX transactions eligible for CLS payment-versus-payment settlement to include those of NBFIs. This was in large part due to CLS’s efforts with the South Korean central bank and local FX market participants to provide further mitigation of settlement risk in the country.
The South Korean won currently accounts for 1.2% of daily currency turnover globally1, and the addition of the first South Korean NBFI to CLS will support the continuing growth of South Korea as a financial center, which is currently ranked the sixth largest in the world2.
"This marks an important milestone in our efforts to broaden access to CLS in Asia," said Rachael Hoey, Head of Asia at CLS. “Expansion of third-party settlement services is a key part of our strategy to mitigate settlement risk, underpin financial stability and deliver the unique benefits of CLS to a wider pool of counterparties. We look forward to continuing our work with the South Korean financial community to encourage and facilitate participation from the NBFI sectors.”
Byungyong Lee at KEB Hana Bank commented: "The ability for NBFIs to access CLS is crucial to removing barriers to entry and supporting the continued growth of South Korea’s FX market. As the first bank in South Korea to offer third-party services to NBFIs, we are able to provide an enhanced service offering to our clients. By facilitating access to CLS settlement, we are able to pass on key benefits of the service to our non-bank clients, such as FX settlement risk mitigation and efficiencies through reduced counterparty credit risk.”
“The ability to settle via CLS adds another level of control to our trading process while ensuring the effective mitigation of FX settlement risk. We also expect to benefit from a greater capacity to trade as a result of reduced counterparty credit risk and through the introduction of more automated processes and streamlined trading operations,” added SeongMin Han at Samsung Securities.