CLS Signs Banco Monex as Third-Party Participant in CLSSettlement

CLS’ FX settlement service is available both directly, to settlement members, and indirectly, to third-party clients.

Foreign exchange settlement provider CLS Group said Mexican lender Banco Monex has joined as a third-party participant of CLSSettlement. With this, Banco Monex becomes the first Latin American third-party service provider of CLS’s payment-versus-payment (PvP) FX settlement service.

Banco Monex has been a CLSSettlement member since 2018, and upgrading its status reflects an increase in third-party participation in the service throughout the region. It was the first Mexican bank to participate directly in CLSSettlement back in 2018.

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CLS’ FX settlement service is available both directly, to settlement members, and indirectly, to third-party clients. Over 25,000 third-party clients use CLSSettlement including banks, funds, non-bank financial institutions and multinational corporations.

CLS Group, which provides risk mitigation and settlement services for FX dealers and institutions, has recently welcomed Metrobank as the first Philippine bank to access CLSSettlement as a third-party participant.

CLSSettlement service was one of the most notable spots of CLS’s business over the last two years, with the asset’s the amortization period being reduced, which will continue to impact on its future profitability for a number of periods. However, the accounting practice reflects CLS’ strategic decision to replace and modernize the underlying technology platform that supports CLSSettlement.

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On completion of this multi-year project, CLSSettlement will use a new platform that the company believes will enable more efficiency, multi-session capability, and adhere to the industry standards to support its future goals.

The move also comes as part of a broader strategy that aims to shake off CLS’ image as a traditional settlement services provider. Instead, the company, which was formed in 2002 to reduce FX settlement risks, recently has been keen to promote itself as a provider of innovative products, including post-trade risk management, aggregation and netting solutions.

Earlier this month, CLS Group reported a record increase in average daily volume. During the month, the average daily traded volume submitted to the company was $2.19 trillion in March 2020, up 21 percent month-over-month from $1.811 trillion in February 2020.

Commenting on the news, Héctor Lagos, CEO of Banco Monex, said: “As a CLSSettlement member for nearly two years, we have benefited from the increased liquidity, reduced settlement risk and greater operational efficiency the service provides. We look forward to facilitating access to CLSSettlement for our clients as third parties and believe this will help to build a more robust FX market in Latin America and globally.”

Alan Marquard, Chief Business Development Officer at CLS, added: “Banco Monex’s decision to enable access to CLSSettlement for third-party participants, including funds, non-bank financial institutions and corporates, is a prime example of how our PvP FX settlement service is a business enabler. In addition to settlement risk mitigation, CLSSettlement provides participants with business growth opportunities through enhanced credit efficiency, an expanded range of counterparties, and increased trading opportunities.”

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