Talk:Continuous linked settlement

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[edit] CLS settles trades on a gross basis

CLS does not net settle, but banks only need to pay in sufficient to oil the settlement processes. Because all the trades settle in one place, a small amount of liquidity can cause all trades to be settled via a progressive pay in of the days net settlement anounts. The trades themselves settle gross. The distinction is important only in the event of a pay-in failure because many banks may be affected by this, but only the trades not possible to be settled will be affected, which may be less than 100% of all trades with that counterparty has effectively defaulted on that day.

Counterparties to a bank failing to pay in are protected only in so far as they still have the trade countervalue in CLS. In the event of a real default (e.g. bank liquidation), bank counterparties are exposed to the risk that the replacement trades needed to cover the defaulted trades may have to be executed in the market at a loss. —Preceding unsigned comment added by 84.250.7.88 (talk) 11:02, 22 June 2007 (UTC)

Whilst I see what you are getting at, I think the original sentence still holds - but with minor editing for clarity. Therefore, I have re-inserted it (with the minor change).

Instructions entered into CLS by participant banks are, indeed, entered on a gross basis. But...settlement is on a multilaterally net basis. The funding required to settle is precisely calculated with respect to currency-derived and institution-specific credit-derived factors. Regarding pay-in failure - counterparties are not exposed to anything approaching replacement-cost, as both the "defaulting" member's short-currency positions and the long-currency countervalues are subject to conservative currency haircuts in order to allow for extreme market movements. —Preceding unsigned comment added by Boglebud (talk • contribs) 19:24, 30 June 2007

[edit] GDP

When calculating GDP, is the CLS considered part of the US? If so, then wouldn't that mean that paying or receiving payment from someone outside the US through the CLS never changes the GDP? Bob the Wikipedian, the Tree of Life WikiDragon (talk) 21:28, 12 April 2008 (UTC)