CLS, a financial market infrastructure delivering settlement, processing and data solutions across the global foreign exchange (FX) ecosystem, announces its collaboration with 12 settlement members to pilot payment-versus-payment (PvP) solutions.
The pilot will evaluate the potential for PvP solutions for currencies that are not currently eligible for CLSSettlement.
Beginning in June, the pilot is using trade data from each participating settlement member to better inform the overall design of the optimal solution.
Recent public policy proposals have acknowledged the need for greater PvP adoption, including building block 9, “Facilitating increased adoption of PvP”, and related action items in the Financial Stability Board’s cross border payments roadmap.
Speaking about the recent pilot, Marc Bayle de Jessé, CEO of CLS, says: “CLS is placed at the centre of the FX industry to work in partnership with the public and private sector, to develop a PvP solution that will address settlement risk for currencies that are not currently eligible for CLSSettlement.
“We are now working with the market to evolve the service to further mitigate settlement risk and unlock liquidity. The support we have received from our settlement members through their participation in the working group and pilot is a vote of confidence in CLS’s ability to solve this industry challenge by creating a PvP solution for currencies not supported by CLSSettlement.”
Giles Page, global head of linear FX from Citigroup adds: “We welcome the work CLS is undertaking to tackle settlement risk and liquidity optimisation across the FX industry.
“While establishing an alternative PvP solution to address the expansion of FX settlement risk will take time, we are optimistic that the work currently underway will deliver significant industry-wide benefits.”
Bank of America, BNP Paribas, Citigroup and J.P. Morgan are some of the 12 settlement members working with CLS.
CLS established the working group in late 2020 in response to input from market participants and several public policy initiatives to encourage PvP adoption.
