Industry pushes to expand CLS coverage

"From the industry's perspective, we are seeing a collaborative push to get the industry overall to move onto CLS, because everyone recognises that is the real solution," said Jonathan Kemp, London head of foreign exchange operations at Citi.

William Boss, global head of FX operations at UBS, agreed there was a need to expedite the process of getting more participants onto CLS, and added the industry now better understands the cost benefits of CLS settlement.

"As an industry, we have been reminded of the value we are getting for that price," he said. "We talk less about needing to make CLS cheaper and more about getting more currencies on CLS, and a broader coverage of clients and counterparties."

Rachael Hoey, director of business development at CLS, said the industry utility has already embarked on a programme to review its participation model, to cater for more institutions both through the direct-bank and third-party models.

"We have seen a spike both in financial and non-financial institutions looking to come on board, and are looking at our model, and how we can enhance participation across the board," said Hoey. "We are in consultation with the community in terms of non-CLS counterparties, non-CLS currencies, and non-CLS products. We are having more conversations with heads of FX than we have ever had before."

Hoey added the bank experienced about 71% year-on-year volumes growth in October.

The panellists also agreed on the need to look at enhancing operational models outside CLS, to help mitigate risks. Frank Smith, business consultant at Deal Hub in London, highlighted the need to assess and price credit before trading, adding the vendor had seen a spike of interest in this area.

However, panellists said that, although credit and settlement risk are the main focus, volume reduction through bilateral netting is still important.

"Up-front aggregation is being discussed across the industry and is something I think is generally around the corner," said Kemp. However, he said the reduction of settlement risk is the key topic at the moment, "so bilateral netting is going to be on the back burner for some time".