Financial traders transacting in the popular US and Canadian dollar currency pair, will benefit from a new risk management service launched by the global risk mitigation facility, CLS Group. The firm announced that it will extend its offer to enable members to settle same-day US dollar (USD) and Canadian dollar (CAD) trades.
The new solution will allow members to settle and take delivery of transaction on the same day. Since its launch in 2002, CLS has taken strong measures to remove settlement risk in the world’s most liquids asset classes. The launch of the Americas Same-Day Settlement (SDS) Session by CLS will inhibit trading in the popular USD/CAD instrument. These trades had not previously been eligible for CLS Settlement, due to the cut-off times in the CLS main Settlement Session. SDS is run as an additional service to CLS’ Main Settlement Session with a unique Operational Timeline.
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David Puth, Chief Executive Officer of CLS, commented on the new initiative in a statement to the media, “We have seen a significant demand from our member banks for a service that mitigates settlement risk for same-day FX transactions. By establishing an additional service that captures payment instructions submitted after customary CLS cut-off times, we are continuing to deliver on our mission to enhance financial stability, by providing risk mitigation services to the global FX market. SDS is a major step forward in enhancing the risk mitigation, liquidity, operational and IT efficiencies delivered by CLS.”
The USD/CAD cross will be the first that is offered on the SDS solution, this is primarily due to the liquid nature of the crosses. According to the most recent BIS FX survey, Canada trades an average daily of $65 billion in FX volumes. In addition, the two currencies share the same time zone. The SDS solution will be expanded to the emerging market FX pair, Mexican peso in the coming months. Seventeen CLS member banks will be using the service, with nine banks going live on the launch of the service.