Forex settlement provider CLS has announced that its blockchain payment netting service is now live.
CLS provides settlement services to its members in the foreign exchange market (FX). It operates a global multi-currency cash settlement system through which settlement risk can be mitigated with finality using a combination of PvP settlement over CLS central bank accounts, local real-time gross settlements systems (RTGS) and multilateral payment netting supported by a resilient infrastructure. Since it began operations in 2002, CLS has rapidly increased and by March 2017 was settling just over 50% of global FX transactions.
The company’s new service, called CLSNet, is a standardized, automated bilateral payment netting service for over 120 currencies operating on a distributed ledger technology (DLT) platform. It is the first global FX market enterprise application running on blockchain in production. The platform is aimed at buy-side and sell-side institutions, and is designed to standardize and increase the levels of payment netting, reduce costs for market participants and increase liquidity in FX markets.
“We are excited to be launching CLSNet, the first service of its kind to be operated on a DLT platform,” said Alan Marquard, Chief Strategy and Development Officer of CLS. “Further, this offering demonstrates how we are using our unique, trusted position at the center of the FX market to solve industry challenges. A standardized and automated payment netting process will lead to improved intraday liquidity, reduced cost, improved operational efficiencies and ultimately support business growth.”
CLSNet is currently live with Goldman Sachs and Morgan Stanley. Six additional participants from North America, Europe and Asia, including Bank of China (Hong Kong), have committed to joining the service, with a steady onboarding of several other market participants planned in the next few months.
“CLSNet will deliver the standardization and automation needed for non-CLS settled transactions,” said Adam Josephart, Managing Director, Fixed Income Division, Morgan Stanley. “We are delighted that Morgan Stanley is one of the early adopters of the service.”
The new service was built in collaboration with tech giant IBM and runs on the Linux Foundation’s Hyperledger Fabric blockchain framework. CLS said that its partnership with IBM, which started in September 2016, has produced valuable insights into the benefits that DLT can bring to post-trade processes. It added that the knowledge and experience gained from building CLSNet will be applied on DLT architecture as it looks to create greater efficiencies and reduce costs for clients.
“Since we first pioneered the use of blockchain in the FX market nearly three years ago, IBM has been working hard with CLS on the development and deployment of CLSNet as the first post-trade production deployment of blockchain technology in a global market utility,” said Marie Wieck, General Manager of IBM Blockchain. “With CLSNet now in production with two of the world’s largest banks, for a major market function, it is a testament to the ongoing maturity of blockchain technology and the value that it can deliver in practice.”
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