Financial market infrastructure provider, CLS announced on Wednesday its partnership with two new banks, Alfa-Bank and First Abu Dhabi Bank, that agreed to use payment netting calculation services CLSnet.
First Abu Dhabi Bank is the United Arab Emirates’ largest lender, and Alfa-Bank is based in Russia. Both are the first lenders in their country to join the service and have agreed to initiate onboarding to CLSNet.
The new banks have joined the likes of Bank of America, Bank of China (Hong Kong), BNP Paribas, Citibank, Goldman Sachs, JP Morgan, Morgan Stanley and a few others as the users of the CLS’s services.
“The addition of these emerging market leaders demonstrates the appeal of CLSNet to FX market participants trading in emerging market currencies,” CLS’s Global Product Head, Keith Tippell, said. “Given the sharp focus on settlement risk mitigation across the industry, CLS is investing further in evolving CLSNet to ensure broad-based adoption and explore new functionality related to liquidity optimization and payment certainty.”
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Based on a distributed ledger technology (DLT), CLSNet standardizes and increases the levels of payment netting in the forex market. Banks are taping the service to improve intraday liquidity and increase risk mitigation for non-CLS-settled currencies.
The service can be used by both settlement members and non-CLS banks and the buy-side.
Improving Settlement with Local Currencies
Andrew Chulack, Alfa-Bank’s Deputy Chairman, commented: “Our participation in the service will be integral to our ability to improve operational efficiency and reduce risk for the currencies that we trade, particularly the Russian ruble, which is not currently eligible for settlement in CLS.”
“Being the first mover in the Middle East showcases FAB’s commitment to embrace innovation, particularly as a specialist in emerging markets,” FAB’s Anan Samaneh added. “We hope our vision to constantly grow stronger will spur other organizations in the region to similarly participate in this netting and confirmation system and improve standards across the board.”