CLS proposes second-tier FX settlement system

Stripped-back system for EM currencies mooted to tackle rising settlement risk

FX settlement risk

With foreign exchange settlement risk on the rise, CLS is considering creating a second-tier settlement system for emerging market currencies that are not eligible for its main service, in a bid to encourage a wider adoption of payment-versus-payment (PvP) settlement methods. 

The issue was discussed during the July 15 meeting of the New York Fed’s FX committee (NYFXC) in response to an increase in settlement risk in emerging market currencies deemed ineligible by regulators for use at CLS. 

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