Goldman Sachs and Morgan Stanley go live with CLSNet
As reported in July, market infrastructure group CLS and IBM teamed up for a proof of concept (PoC) using a distributed ledger technology (DLT) platform to offer services hosted on a shared network.
In the latest development, six additional participants from North America, Europe and Asia, including Bank of China (Hong Kong), have committed to joining the service. More institutions will sign up in the coming months.
The tech, designed for both buy-side and sell-side, will standardise and increase the levels of payment netting in the FX market for trades not settling in CLSSettlement, which can reduce and increase liquidity in FX markets.
The firm says it also supports compliance with certain principles of the FX Global Code of Conduct.
Commenting on the launch, Alan Marquard, chief strategy and development officer at CLS, says: “A standardised and automated payment netting process will lead to improved intraday liquidity, reduced cost, improved operational efficiencies and ultimately support business growth.”
CLS says that a lack of standardisation and automation introduces risk and operational inefficiencies for market participants, as processes often have manual intervention and are not fully scalable.
Further, there are many FX market participants that do not net the payments in respect of FX trades, instead choosing to settle on a gross basis, which results in higher intraday liquidity demands and causing institutions to hold more capital.
“Since we first pioneered the use of blockchain in the FX market nearly three years ago, IBM has been working hard with CLS on the development and deployment of CLSNet as the first post-trade production deployment of blockchain technology in a global market utility,” adds Marie Wieck, general manager, IBM Blockchain.
She adds: “With CLSNet now in production with two of the world’s largest banks, for a major market function, it is a testament to the ongoing maturity of blockchain technology and the value that it can deliver in practice.”
CLSNet runs on the Linux Foundation’s Hyperledger Fabric blockchain framework.