Blockchain-Based CLS Payment Netting Becomes Operational with Goldman Sachs and Morgan Stanley

A project which started sometime in 2016 has finally gone operational. While this may sound like just another news, it is, in fact, one of the best news this year as it is the first of its kind. For the first time, blockchain technology is being employed in the global FX market. This was made possible by building a blockchain-based standardized automated bilateral payment netting service to cater to over a hundred and twenty currencies.

The service dubbed CLSNet was built by CLS, the biggest FX company known for providing risk mitigation to FX market globally, in conjunction with the blockchain-based giant Information Tech firm – IBM.

CLSNet which went live Wednesday, November 28, has attracted participants across the globe. Among which are some of the largest banks in the world including Goldman Sachs , Morgan Stanley , the Bank of China, and five other participants from Europe, Asia, and North America. Several other market participants have pledged to queue into the initiative in a few months.

According to CLS, the service – CLSNet – was built with a mix of buy-side and sell-side institutions and has been furnished with the ability to standardize and increase the levels of payment netting in the global  market for trades that do not settle in CLSSettlement. Through this service, liquidity in the FX market would be increased tremendously while drastically reducing the cost for market participants at the same time.

The service will also help mitigate the post-trade risk that comes with settling foreign currency trades in future markets. What else could we ask for than a safe and efficient service?

Commenting on the groundbreaking event, the Chief Strategy and Development Officer of CLS, Alan Marquard, said the new development helps to demonstrate the extent to which they are using their unique, trusted position in the FX market to remedy challenges facing the industry. This was after he expressed his excitement over the one-of-its-kind service.

Furthermore, he opined that the service will help improve intraday liquidity, operational efficiencies and reduce cost which combined would cause a tremendous spike in the growth of businesses.

After expressing his excitement on Morgan Stanley being among the early adopters of the service, Adam Josephart, Morgan Stanley Managing Director, Fixed Income Division, said he is positive the CLSNet will deliver the standardization and automation (which the market currently lacks) needed for non-CLS settled transactions.