Continuous linked settlement

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Continuous Linked Settlement (CLS Group Holdings AG and subsidiary companies) was created in September 2002 by a number of the world's largest banks, for the purpose of settling foreign exchange flows amongst themselves (and their customers and other third-parties). Technically it is a bank regulated by the Federal Reserve Board of New York and, as of September 2007, there are 57 member (shareholder) banks, and 1846 third-party institutions that participate in the system.

Since it began operations, CLS has rapidly become the market-standard for foreign exchange settlement between major banks, and as of September 2007 it settles about 325,000 instructions a day in 15 currencies (which represent some 98% of global foreign exchange trading) and with an average daily value exceeding US$3.3 trillion.

On 19 March 2008 a record 1,113,464 payments were settled with a gross value of US$ 10.3 trillion. This new record exceeded the previous record of US$ 8.75 trillion, and is the first time in history when transactions have exceeded US$ 10 trillion.

A key feature of CLS is the settlement of gross-value instructions with multi-lateral net funding. On average, CLS netting efficiency is in the region of 98%; that is to say, each trillion dollars of gross value settled might require aggregate pay-ins of "only" $20 billion.

CLS settles transactions on a "Payment versus Payment" basis, also known as PVP. When a foreign exchange trade is settled, each of the two parties to the trade pays out (sells) one currency and receives (buys) a different currency; PVP ensures that these payments and receipts happen simultaneously. Without PVP there is a (small - but with potentially devastating financial consequences) chance that one or more parties could pay away funds to another institution but not receive any reciprocal funds due (generally for reasons of credit-related default) - this is known as settlement risk, or Herstatt risk.

1 Currencies
2 References
3 See also
4 External links

[edit] Currencies

CLS currently trades the following currencies:

Country/Entity	Symbol	Currency
Australia	AUD	Australian dollar
Canada	CAD	Canadian dollar
Denmark	DKK	Danish krone
European Union	EUR	Euro
United Kingdom	GBP	Pound sterling
Hong Kong	HKD	Hong Kong dollar
Israel	ILS	Israeli Shekel
Japan	JPY	Japanese yen
South Korea	KRW	South Korean won
Mexico	MXN	Mexican Peso
New Zealand	NZD	New Zealand dollar
Norway	NOK	Norwegian krone
Singapore	SGD	Singapore dollar
South Africa	ZAR	South African rand
Sweden	SEK	Swedish krona
Switzerland	CHF	Swiss franc
United States	USD	United States dollar