There is widespread agreement that CLS – the continuous linked settlement system – has performed an admirable job since it started operations in September 2002. Its effective removal of settlement or Herstatt risk for the majority of foreign exchange transactions is often cited as one of the catalysts for the recent growth in the market. However, as it approaches its fifth anniversary, CLS is frequently seen in some quarters as acting as a brake on further market expansion because its business model has become anachronistic.
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