CLS and Finastra will be providing Finastra customers with access to CLSNet, CLS’s bilateral payment netting calculation service. The move addresses increased demand from the buy-side for a centralized infrastructure to manage post-trade processes.
Through a single integration, some 800 corporates/buy-side institutions will be able to access CLSNet without the need for additional development. Users will be able to view trades which are expected to settle, confirm trade details with each relevant counterparty as well as make net settlement payment calculations on a per currency basis, thereby removing manual reconciliation netting processes.
A large number of market participants currently manage the bilateral settlement process via email. The collaboration between CLS and Finastra is a significant step in addressing the operational risk associated with these manual processes, in particular between banks and their buy-side clients.
Keith Tippell, global head of Product at CLS, said in a statement: “In response to market demand, we are evolving CLSNet to support the partnerships and connectivity options necessary to ensure broad-based adoption and, additionally, exploring new functionality related to emerging market currencies.”
The impact of limited payment netting is exacerbated by the high settlement costs associated with emerging market currencies, despite their rising relevance for FX market participants. As a bilateral payment netting calculation service for FX trades not settling in CLSSettlement, CLSNet allows FX participants to net payment amounts directly with counterparties before settling through the correspondent banking system.
By using standardization and enabling a greater percentage of FX transactions to settle on a net basis, the service optimizes intraday liquidity, while delivering greater operational efficiency and increased risk mitigation for non-CLS-settled currencies. For CLSNet participants, the collaboration with Finastra will create a greater network effect by enabling a wider group of market participants to benefit from the standardization and automation of post-trade netting processes.
Anna Chadderton, global head of FX Operations at Goldman Sachs, said in a statement: “Goldman Sachs welcomes this partnership which will drive further efficiency and increase automation and standardization in post-trade execution services. We remain committed to opportunities for risk reduction and liquidity optimization in the FX industry.”