CLS Group, a provider of settlement services to its members in the foreign exchange (FX) market, has endorsed a recent initiative by Japan’s Financial Services Agency (FSA), helping promote payment-versus-payment (PvP) settlements, per a CLS statement.
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The widespread usage of PvP settlement can be instrumental in reducing settlement risk, helping shore up vulnerabilities in operational risk management – additionally, this can also help stimulate growth in Japan’s currency market. This movement is also commensurate with a recent commitment by Japan as a whole to help strengthen its domestic settlement climate.
This initiative was also necessitated by a heightened focus on regulation, growing cross-border investment and reducing securities trade settlement cycles globally. In addition, the adoption of a PvP settlement system is also beneficial for commercial banks, trustees, and other securities entities throughout Japan. For its part, CLS is in a strategic position as a provider of risk mitigation and services for the global FX market, which lends weight to the FSA-supported initiative.
Japan is presently one of the world’s largest centers for currency trading and a crucial hub for the Asian FX community. Participation in CLS is important as it would ultimately help embolden risk management and operational efficiencies for groups not already utilizing PvP systems.