Best FX market data provider of the year: CLS

With trading increasingly driven by quantitative execution strategies and algorithms, market data plays a vital role in helping traders choose where and when to trade, as well as monitoring the success of their strategies.

Given the fragmented nature of the FX market, the challenge is to source high-quality transaction data to gain a better view of overall trading activity.

“In response to this need, CLS released a new suite of market data products for FX market participants,” says Alan Marquard, chief strategy and development officer at CLS.

As a large risk mitigation provider in foreign exchange, settlement utility CLS has warehoused the details of every trade by instrument (swap, spot, outright forward) for the 18 currencies it settles across 33 major currency crosses – creating the largest single aggregated source of executed FX trade data available to the market, representing more than 50% of CLS-eligible FX volumes.

In terms of addressing liquidity concerns, CLS will shortly be launching a bilateral same-day payment-versus-payment gross settlement, CLSNow, initially in CAD, EUR, GBP and USD. The service will enable banks to exchange liquidity positions across currencies with reduced settlement risk on a near real-time basis, helping them to meet their intraday funding needs.

A raft of products and enhancements for its data businesses have issued forth from CLS over the past year. One, CLS’s FX Forecast data, provides subscribers with a forward-looking view of foreign exchange markets on an hourly basis, enabling them to rapidly detect potential price movements and identify trading times that hold deep liquidity, in order to reduce market impact and signal risk.

We have responded to this need by using CLS’s unique position in the FX market to launch a comprehensive suite of market data products to meet FX market participants’ intraday and daily needs

Alan Marquard, CLS

The benefit to risk and compliance teams is better prediction of volume and rate changes, which can help inform their models and views around volume surges, Marquard says. He adds that CLS has increased the granularity of its FX volume upload to five-minute intervals in response to customer demand.

CLS has also launched CLSReporting for FX matched instructions, which supports members with their reporting requirements for the second Markets in Financial Instruments Directive (Mifid II). It gives counterparties trading FX with each other the ability to exchange additional information in their settlement instructions, submitted via Swift Fin and ISO 20022 messages, which are both standards for exchanging electronic messages between financial institutions.

Mifid II effect

Following the implementation of Mifid II, the level of focus that clients are placing on the need for data and reporting services to help demonstrate best execution has created a big shift in emphasis in FX market infrastructure, says Marquard.

“We have responded to this need by using CLS’s unique position in the FX market to launch a comprehensive suite of market data products to meet FX market participants’ intraday and daily needs,” he adds.

Other milestones for CLS business lines include the launch of CLSNet, a bilateral payments-netting service for approximately 120 currencies. Goldman Sachs and Morgan Stanley went live with CLSNet in November 2018, with a further three clients joining in December; others are currently being onboarded.

Furthermore, CLSClearedFX, a payment-versus-payment settlement service specifically designed for over-the-counter cleared derivatives, has been introduced.

Looking to the future, while CLS has focused on the spot market for its CLSMarketData product suite, it is now developing data products for other instruments such as FX forwards.