The FX market infrastructure group CLS Group has achieved a milestone by settling a record $19.1 trillion in foreign exchange payment instructions today (Thursday). This new record surpassed a previous high of $16.3 trillion set in December 2023.
Settling Record FX Payments
According to the press release, CLS's method of settling payments through a payment-versus-payment system significantly mitigates settlement risk, which is a major vulnerability in FX transactions. Each day, CLS reportedly settles over $6.5 trillion across 18 of the most actively traded currencies.
This system ensures that payments related to FX trades are simultaneously settled and aims to safeguard members and their clients against the risk of non-settlement.
"By leveraging our centralized platform and multilateral netting approach, we have reduced funding requirements by over 96%," CLS mentioned. This reduction highlights how CLS enhances security and boosts efficiency, allowing clients to better allocate their capital and resources.
Minimal Funding requirement
CLS reportedly handled the $19.1 trillion in settlements with just $72 billion in required funding. This represents 0.38% of the gross value settled, highlighting the minimal funding needed compared to the volume settled. According to the company, this approach reduces costs and enhances liquidity in the FX market.
More than 70 of the world’s leading financial institutions are members of CLS, with over 35,000 additional users, including banks, funds, non-bank financial institutions, and multinational corporations.
Early last year, CLS reported that its average daily traded volumes of forex trading in January 2023 recovered from a three-month decline that started in September 2022. The ADTV for the month came in at $1.92 trillion, which was a 12.3% increase from the $1.7 trillion recorded in December 2022. However, compared to January 2022, the volumes only expanded by 2%.
Elsewhere, CME Group recently announced that the daily volume of foreign exchange futures on its derivatives platform reached a record high of 3.26 million contracts, with a notional value of $314 billion, on June 12. The latest FX futures figure surpassed the prior record of 3.15 million contracts, with a notional value of $296 billion, achieved on March 8, 2023.
