FX Markets Asia Awards 2020: Best FX settlement and risk mitigation solution/Best market data provider – CLS Group

As the largest settlement risk mitigation provider in the FX markets, CLS Group already plans to widen its market-stabilising mission and make settlement safer, more efficient and more cost-effective

Winner of best FX settlement and risk mitigation solution and best market data provider at this year’s FX Markets Asia Awards is CLS Group.

Launched in 2002, CLS has warehoused the detailed information for more than 1 billion trades across 18 actively traded currencies to create the largest single source of FX executed trade volume data available to the market today – CLSMarketData. 

CLSMarketData is aggregated from a database of trades by instrument (swap, spot, outright forward) for 18 currencies across 33 major currency pairs. Access to data from CLS provides clients with a unique and detailed view of market activity that supports best execution and enhances risk mitigation.

The fragmented FX market poses a challenge for traders and other market participants to source high-quality market data that they can use to gain a better sense of trading activity, trends and risks. As the largest settlement risk mitigation provider in the FX market, with settlement data from over 70 of the world’s largest financial institutions, CLS is uniquely placed to offer a comprehensive view.

Margaret Law, head of client management, Asia-Pacific, at CLS Group, says: “Because CLS offers such a unique view of the FX market, we played a key role this year in enhancing transparency for market participants. As the pandemic gathered pace, market participants were faced with abnormal currency exposure, especially during the period of wide-scale volatility in March 2020, where CLSSettlement reached record average daily traded volumes of $2.19 trillion.”

CLS launched two key initiatives earlier this year to provide clients with a deeper understanding of market dynamics. It collaborated with Mosaic Smart Data and MUFG to analyse the impact of the Covid‑19 crisis on FX liquidity and provide clients with insights. CLS also teamed up with causaLens to apply big data technology to examine the main factors influencing market participants’ behaviour in the FX market.

CLS Group plans to enhance its data team and technologies. Law says: “Sophisticated investors already use CLS’s volume data to enhance trading strategies, and the CLS data science team is currently working on various product development ideas to help its clients better understand FX market dynamics.”

Expanding on CLS’s risk mitigation services, CLSSettlement is a leading payment-versus-payment solution, helping make settlement safer, more efficient and cost-effective. On average, CLS settles upwards of $5.5 trillion daily. As a systemically important financial market infrastructure (FMI), it is subject to the Principles for financial market infrastructures, designed to ensure the mechanisms supporting global financial markets are robust and can withstand shocks. Settlement risk is the largest risk in the FX space, and the pandemic has only underlined the importance of an FMI and its role in helping to assure market stability.

CLSSettlement protects its members and their clients by settling the payments instructions for FX transactions between counterparties worldwide. The market volatility triggered by Covid-19 has reinforced the importance of well-regulated FMIs such as CLS. As CLS volumes reached record levels in March this year, and average volumes rose around 20% higher than normal, CLS was able to continue processing without any problems or delays.

CLS is focused on broadening the reach of CLSSettlement, as well as the entire suite of CLS’s solutions, to help the market mitigate risk and enhance operational efficiencies. It is a leader in the risk management space, urging the regulatory industry to band together to reverse the expansion of FX settlement risk. As Law explains: “CLS believes that preventing further growth of FX settlement risk is not an impossible task, and mitigation of this risk should be at the forefront of the industry and regulatory agenda globally. CLS will continue with its efforts to raise awareness of this pressing issue.” 

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