UAE FAB bank part of CLS Blockchain pilot payment solution for new currencies

CLS, a financial market infrastructure delivering settlement, processing and data solutions across the global FX ecosystem, will be working with a group of 12 Banking settlement members in a pilot to evaluate potential payment-versus-payment (PvP) solutions for currencies that are not currently eligible for CLS Settlement. The pilot, which started in June, is using trade data from each participating settlement member, which includes UAE FAB ( First AbuDhabi Bank), to better inform the overall design of the optimal solution.¹ CLS will be using its blockchain enabled CLSNet which was launched with IBM back in 2018. UAE Fab bank joined CLS Net back in January 2021.

Recent public policy proposals acknowledge the need for greater PvP adoption, including building block 9, “Facilitating increased adoption of PvP”, and related action items in the Financial Stability Board’s Cross Border Payments Roadmap. The Global Foreign Exchange Committee has recently published an updated version of the FX Global Code.² The latest version includes changes to the settlement risk principles, including greater emphasis on the use of PvP mechanisms where available, and provides more detailed guidance on the management of settlement risk where PvP settlement is not used.

CLS established the working group in late 2020 in response to input from market participants and several public policy initiatives to encourage PvP adoption. CLS has also recently completed the next stage in its multi-year technology investment program to deliver one of the most sophisticated, flexible and resilient post-trade technology infrastructures in the industry.

Marc Bayle de Jessé, CEO of CLS, commented, “CLS is uniquely placed at the center of the FX industry to work in partnership with the public and private sector to develop a PvP solution that will address settlement risk for currencies that are not currently eligible for CLSSettlement. CLSNet – our bilateral payment netting calculation service – is already open for approximately 120 currencies, reducing risk and delivering efficient, automated and standardized post-trade netting calculation and processing services for banks, asset managers and corporates across the globe. “We are now working with the market to evolve the service to further mitigate settlement risk and unlock liquidity. The support we have received from our settlement members through their participation in the working group and pilot is a vote of confidence in CLS’s ability to solve this industry challenge by creating a PvP solution for currencies not supported by CLSSettlement.”