Don’t sweep bilateral settlement risk under the carpet

Non-CLS-settled FX swaps still pose major risks, says Baton Systems’ Alex Knight


The Bank for International Settlements’ (BIS) deep dive into the foreign exchange swaps market for CLS currencies last month will be welcomed by the vast majority of the industry. As of mid-last year, outstanding FX swaps and forwards eligible to be settled via CLS amounted to $25 trillion, with FX swaps accounting for more than 80% of the total market (see chart).

However, despite this report providing a thorough academic assessment of why FX swaps are such a critical component of daily FX

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