The US-based firm has unveiled CLS Data, a new product that leverages its extensive store of FX market data, which is available to clients from this month.
CLS has offered clients information about trading volumes for some time. However, CLSData provides the data broken down by the hour, via Quandl, a third party data provider, making it far more useful to market participants.
Alan Marquard, chief strategy and development officer at CLS, says: “The closer we get to real-time data the more useful this information gets, and that is the ultimate goal.”
But CLSData offers more than simply speedier access to the same information that was previously available. It also offers order flow reports and daily pricing reports, with trade-weighted average price (TWAP) and volume-weighted average price (VWAP) also provided hourly.
While the information is not available at a counterparty level, due to the confidentiality of that information, CLS believes it will provide better data from which customers can conduct transaction cost analysis, best execution analysis and reporting.
The launch comes as part of a broader strategic realignment at CLS meant to shake off its image as a conservative, market utility for settlement that has bolted a few extras on the side. Rather, CLS is keen to promote itself as a provider of a broad range of post-trade risk management products.
|Alan Marquard, CLS|
Marquard says: “We sit at the centre of the market, we are well capitalized, well connected and highly trusted. So it makes sense for us to do more for our customers in areas where our expertise overlaps with their pain points, and their need for better services.”
The group has identified three business lines on which it will focus its attention, where it perceives the greatest overlap between the expertise it has developed during its years providing settlement services and demand in the market for post-trade FX services.
The first, of course, is settlement, its founding function. But clients also need new products to improve their ability to process trades, as well as better FX market data. CLS now considers processing and data to be core business lines, alongside settlement.
CLSData sits within the data business line in this new-look CLS. Its years of delivering FX settlement services gives it a unique collection of market data that is unparalleled in the market, including data from currencies outside its flagship settlement function, via the netting service, CLSNet.
The netting business has also given it expertise in processing that it believes it can leverage with a suite of new products like netting engines. But the first launch within the process business line is scheduled to be CLSTradeMonitor, an enhancement to its netting service CLSNet – the first product CLS made available to non-members – due to launch in the first half of 2018.
TradeMonitor is a post-trade monitoring and reporting tool, providing a real-time consolidated view of the match and confirmation status for all trade instructions submitted to CLSSettlement and CLSNet. Like CLSNet itself, it is built using distributed ledger technology, although customers will not have to use the ledger to interface with the system.
Marquard says: “We wanted to improve the netting product we are developing, CLSNet, to make it simpler to use while also adding new services to make it more useful for customers.”
Finally, as part of its settlement business line, CLS will launch CLSNow in the final quarter of next year. CLSNow offers customers settlement within the same day, catering for the growth of same day trading. It is initially available for Canadian dollars, Swiss francs, euros, sterling and US dollars — the main Atlantic currencies traded during the hours the real-time gross settlement (RTGS) system is open.
The service also responds to the increasing importance of liquidity, the demand for which has become intense in recent years, at the same time as the cost of holding it has grown. CLSNow gives customers the opportunity to exchange currencies with others to secure liquidity in a range of currencies at any time when the RTGS system is open.
CLSNow complements the traditional settlement service, with each catering to a different need. Traditional CLS settlement will remain the choice for non-urgent business, owing to its high degree of netting efficiency, typically greater than 96%. But for same day traders looking for a speedier option, CLSNow offers a gross settlement alternative.
CLS believes its renewed focus on its core three business lines strike the perfect balance between leveraging its market expertise and solving its clients’ problems. The three areas are also complementary that will reinforce each other as it builds out its products and expertise in each area.
That said, there were many other areas within FX where CLS has some experience and market participants have some need. Selecting the three areas of focus was as much about deciding what not to focus on as anything else.
CLS considered a number of other market pain points which it could have looked to develop products in, including clearing and execution. However, it concluded there are already third party providers better placed to service those areas, and it would be better placed to work alongside those institutions to deliver post-trade risk management products.
Marquard says: “We considered clearing as a business line as there is clearly a market need. But we couldn't see the advantage of us reinventing that wheel and decided it would be better to collaborate with the third parties already focused on that area.”