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Foreign Exchange

CLS adds NDFs

CLS has extended its services to cover the net proceeds of non-deliverable forward (NDF) trades. The service is going live with member banks and one-third party customer and it will cover 48 reference currencies. Proceeds will be settled in any of the existing 15 CLS settlement currencies.

According to CLS, the number of banks using the service is expected to expand rapidly in the first quarter. The addition of NDFs marks a new phase in CLS’s evolution, as the benefits are more from an operational standpoint than a mitigation of settlement risk. CLS says that it typically costs at least $20 a trade to process NDF deals, but by bringing in a new level of standardization, as well as process automation, CLS expects this will fall to as low as $2.

“For the first time the NDF market will have a comprehensive and standardized processing and settlement solution, all within a robust standard legal framework. CLS Bank has supported the market in the automation of post-trade processing for the 15 currencies it settles and the extension to NDFs provides an effective post-trade solution for a total of 48 currencies,” says CLS chief executive Rob Close.

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