CLS Group, a leading provider of risk mitigation and operational services for foreign exchange dealers and institutions, on Tuesday launched a PVP settlement service specifically designed for OTC cleared FX derivatives, dubbed “CLSClearedFX.”
The PVP, short for payment-versus-payment, is a settlement principle that increases the reliability of settling cleared FX products and assumes that central counterparties (CCPs) and their clearing members are meeting their responsibilities simultaneously.
CLSClearedFX will be open to multiple counterparties with London Stock Exchange’s clearing arm, LCH is the first to go live with the service. It will apply to a range of FX products and cross-currency swaps providing capital, margin, leverage, liquidity and other benefits to industry participants.
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The new solution will operate independently of CLS’s PvP FX settlement service CLSSettlement. Still, clients can better manage their counterparty risks arising from over the counter transactions and enhance their operational efficiency in settling those cleared FX derivatives in a coordinated manner.
CLSClearedFX is the company’s further step towards the development of new solutions that help mitigate FX settlement risk to the cleared FX market. Last week, CLS Group unveiled that its new post-trade monitoring and reporting tool, CLSTradeMonitor, which leverages its extensive experience of risk mitigation and operational services provided for FX dealers and institutions, has gone live.
Commenting on the launch, Alan Marquard, Chief Strategy and Development Officer at CLS, said: “Through the launch of CLSClearedFX, CLS is taking its proven track record in mitigating FX settlement risk to the cleared FX market. Bringing together the market infrastructures that mitigate counterparty and settlement risk, the two biggest risks in OTC cleared FX products, is a powerful step forward for the market.”
Paddy Boyle, Global Head of ForexClear at LCH, added: “Offering physical settlement of cleared OTC FX products is a landmark moment for the market. We are delighted to be collaborating with CLS in pioneering in this area, delivering efficiencies and reducing risk for participants in the FX market.”