NEW YORK, Dec 4 Reuters CLS, the largest multicurrency settlement system for FX trades globally, will decide in the first quarter of 2024 if it can delay settlement instructions for currency trades, potentially giving some reprieve to foreign asset managers at risk of failed transactions because of a U.S. stock market rule change.

Currency trades funding securities transactions currently settle in two days. Investors must change their methods so those transactions are not left out of CLS, missing out on cost efficiency and risk mitigation, when the U.S. Securities and Exchange Commission rule change kicks in next May.

CLS is entering the second phase of a study that began this summer to determine if its CLS Settlement service can accommodate later submissions for nextday FX settlement without destabilizing the markets, Lisa DaninoLewis, chief growth officer at CLS told Reuters.

Should it conclude the change is possible, a solution could be implemented likely after the May 28, 2024 deadline for settling U.S. equity transactions one day after the trade T1.

We need to make sure all members can implement any changes that we agree on, said DaninoLewis. CLS39;s multilateral netting process requires all participants submit FX payment instructions by a predetermined time. Multilateral netting enables them to only transfer the net amount of their combined payment obligations in each currency, which reduces the total funding required to settle each transaction.

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