FX settlement provider CLS Group has announced the opening of an office in Hong Kong today.
The Asia-Pacific region is notable among both institutional and retail FX companies as being an area of significant importance, CLS Group having an established presence in Japan for a number of years, maintaining its part in processing trades from within the world’s largest market. As a whole, the company has been experiencing high settlement values, culminating in a 14.6% spike in June compared to the previous month’s results.
Increasing Asian Presence By Settling More Currencies
CLS Group has established this particular new office in Hong Kong in order to increase the number of currencies in the Asia-Pacific region which it settles, adding to its existing ability to mitigate settlement of 17 currencies worldwide, including sovereign currencies of the Asia-Pacific region which include the Japanese yen, Hong Kong dollar, Singapore dollar, Australian dollar, New Zealand dollar and Korean won.
With the increase of intra-Asian trade flows, CLS Group has identified a business need for the investment in such new offices in the region, and plans to move toward adding further currencies as a result. Whilst other nations in the region such as Singapore and Hong Kong constantly enjoy flourishing domestic financial markets, and are friendly to overseas firms wishing to gain traction in the region, China is the anomaly among all Asian nations.
China On The Agenda
Thus far, it has been nigh on impossible for any FX broker, technology company, liquidity provider or settlement firm to gain traction in China, due to the means by which the government strictly controls relationships between Chinese and non-domestic enterprise.
CLS Group is unfazed by this and has held discussions with central banks in the region, including the People’s Bank of China.
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Historically, there have been actual attempts from FX industry participants, largely on the brokerage side, aimed at trying to penetrate China by establishing joint venture broker deals with Chinese commercial banks. This has not been an easy task so far.
Two classic examples would be the deal between Min Sheng Bank and CMC Markets, and Hua Xia Bank with ODL Markets.
Min Sheng Bank began offering retail clients a marginal forex trading platform with 1:30 leverage which was launched in March 2008, with which roughly 3,000 accounts were acquired per month, and it was shut down by CBRC at June 2008. This is the closest attempt at establishing marginal forex trading in China.
Close examination of the government’s response revealed that the shutdown was a result of a complaint and Chinese government treats public stability very seriously. When a large group of people lose money, regardless of whether it was the fault of the broker or not, the government will treat it as a potential group event and try to find the “balance”. ODL Markets’ deal was called off immediately after the closure of Min Sheng Bank.
The finance sector has always been a sensitive issue from the perspective of the Chinese government. The banking sector is an example of this as all banks in China are state owned. What foreign players can do in China is highly restricted, thus making CLS Group’s talks with the People’s Bank of China a point of interest.
The new Hong Kong office is led by Rachael Hoey, Head of CLS Asia, who made a statement regarding the opening of the facility: “Establishing an office in Hong Kong affirms the growing importance of the Asia region and its currency markets.”
“CLS is making progress in the region, which is reflected by the increasing level of support of our market engagement, particularly with respect to the renminbi. I look forward to leading CLS’ efforts in Asia, broadening our engagement and delivering growth” concluded Ms. Hoey.
David Puth, Chief Executive Officer of CLS Group further stated: “CLS has proven itself as a model that demonstrates how people, technology and international cooperation contributes towards improving stability, liquidity and efficiency in the financial markets.”
“The timing of this development is a welcome addition to our efforts supporting our Asia-based Settlement Members and extending coverage in the region. I firmly believe this is an exciting phase in CLS’ history that demonstrates our commitment to mitigating FX settlement risk globally” concluded Mr. Puth.