High settlement costs – Don’t simply blame CLS
Whenever settlement is mentioned, it seems that the claim is made that CLS is too expensive. As the chart below shows though, CLS costs have fallen, as intended, with the increase in volumes. It now costs £0.57 per instruction to settle through CLS, down from £1.39 in 2004. Of course, costs may not be falling as fast as users want, but it seems that the bulk of post-trade costs are incurred outside CLS – in other words within the banks’ systems.
With CLS having just seen another record month – it settled an average of 727,934 trades with a value $3.84 trillion in October – it may be able to pass on further savings. The worry must be though that although volumes have continued to expand, the cycle may be coming too an end.