CCS trades have significant settlement risk exposure due to the high value of the initial and final principal exchanges. In addition, settling these trades on a gross bilateral basis results in operational inefficiencies and liquidity constraints.
The CCS service can be used seamlessly in conjunction with post-trade processing platform MarkitWire to integrate CCS flows into CLSSettlement, allowing participants to benefit from multilateral netting against all FX transactions. This not only optimizes liquidity but also significantly reduces daily funding requirements. The service’s success is reflected in its exponential growth, with the values of CCS submitted to CLSSettlement up 87% year-on-year in Q3 2024.
The growth in the service also supports the efforts of policy makers and regulators who promote broader adoption of payment-versus-payment (PvP) mechanisms as a means of reducing FX settlement risk and, more generally, systemic risk in the OTC derivatives market.
“We are delighted that Société Générale has gone live on our CCS service,” stated Lisa Danino-Lewis, Chief Growth Officer at CLS. “Participation in the service underscores its effectiveness in enhancing operational and liquidity efficiencies for CCS trades. The growing adoption of this service as well as the growing values submitted indicate that FX market participants are actively pursuing innovative solutions to further reduce settlement risk and improve operational efficiency.”
Pierre-Jean Benazech, Global Head Cross CCY Swaps trading at Société Générale commented, “We look forward to leveraging CLS’s CCS service to optimize liquidity and mitigate settlement risk. The unique PvP settlement system and netting capabilities mark a positive step forward in our efforts to optimize our foreign exchange operations.”
