CLS authorises third-party services launch

The move means banks such as Citigroup, Deutsche Bank, JP Morgan Chase and UBS Warburg will be allowed to offer their client services and link institutions to CLS.

Non-CLS Settlement Members will be also able to settle their foreign exchange trades on the global settlement system.

Competition for the CLS business of smaller banking institutions is fierce, and CLS has said the provision of third-party services could potentially transform the traditional patterns of the bank-to-bank market.

Use of CLS so far since it launched in September (FX Week September 9) has grown to daily volumes of around $300 billion being settled with a 100% success rate. Settlement Members' authorisation to offer third-party services is likely to see volumes grow, Joseph De Feo, chief executive of CLS Group and president and chief executive officer of CLS Bank International told FX Week.

Bump up

"There will be a bump up," he said. "There was a slowdown in the marketing [of third-party services] by some shareholders when there was uncertainty about the go-live date, but in the past four to five months there has been a big acceleration, and there are a number of companies that have signed with Settlement Members."

He added that the initial increase in volumes would not be sharp.

The next priority for CLS, De Feo said, will be to increase the number of CLS shareholders with Settlement Member status. "We have another 11 that are now working on qualifying, and they should be on by New Year," he told FX Week. Currently, 39 of the 66 shareholders are Settlement Members.

The success of CLS's early operations has encouraged the group to move forward with new initiatives, De Feo told FX Week. "People are now feeling so confident that we are beginning to develop more discussion on the strategy," he said. CLS will also add further currencies and develop its plans to offer settlement in other products -- money markets and derivatives and later securities, De Feo said.

Meanwhile, JP Morgan Treasury Services announced last week that 18 institutions have signed up to use the firm's third-party CLS services. The firm also said the institutional market is expressing "increasing interest" in its third-party CLS services.

Other banks have also snared third-party CLS clients. HSBC's client list is in the "high teens" while Citigroup has nine clients and Dutch bank ABN Amro has three clients (FX Week, September 23).

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