CLS Group

Not to be confused with CLS Holdings.
CLS Group
IndustryFinancial services
FoundedJuly 1997
HeadquartersLucerne (holding),
New York (bank)
Area served
18 currency jurisdictions
Websitewww.cls-group.com

CLS Group (for Continuous Linked Settlement), or simply CLS, is a specialized financial market infrastructure group whose main entity is the New York-based CLS Bank. It started operations in 2002 and operates a unique and global central multicurrency cash settlement system, known as the CLS System, which plays a critical role in the foreign exchange market (also known as forex or FX). Although the forex market is decentralised and has no central exchange or clearing facility, firms that chose to use CLS to settle their FX transactions can mitigate the settlement risk associated with their trades.[1] CLS achieve this thanks to a central net (bilateral and multilateral clearing) and gross payment versus payment settlement service directly connected to the real-time gross settlement systems of participating jurisdictions through accounts at each of their respective central banks.

CLS demonstrated its risk-mitigation value in the financial crisis of 2007–2008, during which the forex market remained orderly even in times of severe systemic financial stress,[2] and again during market turmoil associated with the COVID-19 pandemic in early 2020.[3] The CLS System's sophisticated payment versus payment concept does not entirely eliminate forex settlement risk, but reduces it considerably among the currencies that it encompasses.[4]

  1. ^ Michael R. King; Dagfinn Rime (December 2010), "The $4 trillion question: what explains FX growth since the 2007 survey?" (PDF), BIS Quarterly Review
  2. ^ Richard Levich (10 July 2009). "Why foreign exchange transactions did not freeze up during the global financial crisis: The role of the CLS Bank". VoxEU.
  3. ^ Julien Sabet (3 November 2020). "The Foreign Exchange market in 2020: three benefits of Continuous Linked Settlement (CLS)". BNP Paribas.
  4. ^ Ben Norman (24 June 2015). "BoE archives reveal little known lesson from the 1974 failure of Herstatt Bank". Bank Underground. Bank of England.