CLS has already changed the way banks conduct and settle their FX settlement business. For the first time, it introduces, 'payment-versus-payment' (PvP) into the foreign exchange settlement process.

The CLS Bank (CLSB) provides the necessary account structure and mechanism through which the separate payment legs of an eligible foreign exchange trade are simultaneously exchanged (using a payment-versus-payment process), thus eliminating the associated settlement risk. Similarly, all funding obligations are discharged by the use of an overlapping window for the RTGS systems in the CLS countries.

CLS started with seven currencies – AUD, CAD, CHF, EUR, GBP, JPY and USD, but during this year the three non-Euro Scandinavian currencies will be added, as well as the Singapore Dollar.

CLS is expected to extend its reach thereafter, adding new currencies, and an increasing number of participants through an expansion of third party services, whereby non-settlement members of CLS may access the benefits of the system, without incurring the start-up costs.

Continuous Linked Settlement