Reimagining same-day FX with CLS: Exploring the Case for Additional settlement cycles
FNA partnered with CLS to study the liquidity implications and potential benefits of introducing additional settlement cycles per day in CLSSettlement.
FNA used a digital win of CLSSettlement to examine the trade-offs of a potential increase in settlement frequency in CLSSettlement, which currently settles over $7 trillion in FX transactions daily with high netting efficiency.
The investigation found that although additional cycles could enhance market flexibility and reduce systemic risks, they also impact liquidity requirements and netting efficiency.
As global financial institutions explore faster settlement models, the need to balance speed with liquidity efficiency has never been more critical. The study is significant in that it takes a unique look into the trade-off between increasing the number of settlements and reducing netting efficiency, something often neglected by public discourse, and serves as a foundation for future industry discussions on optimizing FX settlement.
Read the full report: ‘Reimagining same-day FX: Exploring the case for additional settlement cycles’ here >
