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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 April 2006, there are 56 member (shareholder) banks, and 711 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 April 2006 it settles about 240,000 instructions a day in 15 currencies (which represent some 98% of global foreign exchange trading) and with an average daily value exceeding US$2.5 trillion.
On 16 January 2007 a record 705,582 payment instructions were settled with a gross value of US$ 5.22 trillion. This new record, following the Martin Luther King US public holiday, is the first time that the volume of payment instructions settled has exceeded 700,000 in one day, and is 33% higher than the previous record of 529,318 set on 20 December.
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.

Contents

Currencies

See also

External links

Currencies

CLS currently trades the following currencies:

Country	Symbol	Currency
	AUD	Australian dollar
	CAD	Canadian dollar
	DKK	Danish krone
	EUR	Euro
	GBP	Pound sterling
	HKD	Hong Kong dollar
	JPY	Japanese yen
	KRW	South Korean won
	NZD	New Zealand dollar
	NOK	Norwegian krone
	SGD	Singapore dollar
	ZAR	South African rand
	SEK	Swedish krona
	CHF	Swiss franc
	USD	United States dollar

See also

★ Clearing (finance)

External links

★ CLS website