HSBC has become the latest institution to join the cross-currency swap service offered by IHS Markit and the CLS FX settlement platform, CLSSettlement.
The service combines CLS’s payment-versus-payment settlement with IHS Markit’s trade confirmation system, MarkitSERV, allowing members to send cross-currency swaps into CLSSettlement for settlement.
Cross-currency swap flows are then multilaterally netted against all other FX transactions in CLSSettlement for liquidity optimisation.
IHS Markit and CLS said increasing the flow of cross-currency swaps to the CLSSettlement service was in response to industry calls to increase payment-versus-payment settlement to mitigate risk.
The pair added that global trading of currencies that do not have payment-versus-payment settlement mechanisms has continued to rise, with several international standard setting bodies including CPMI and the Global Foreign Exchange Committee examining how this can be addressed in the FX market.
“As more settlement members join the service, they will benefit from significant operational and funding efficiencies. CLS has long advocated for greater PvP adoption to mitigate FX settlement risk, and by increasing cross-currency swap flows to CLSSettlement, HSBC’s participation will help to achieve that,” said Lisa Danino-Lewis, global head of sales at CLS.
HSBC is the ninth settlement member to go live with IHS Markit and CLS, after US investment bank Goldman Sachs became the eighth institution to sign up to the settlement service in June last year. Goldman was already a client of CLS having joined CLS’s same-day FX settlement service for, CLSNow, in July 2019.