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CLS and its role in foreign exchange (FX) settlement

CLS and its role in foreign exchange (FX) settlement. Jonathan Butterfield “Russian Rates Derivatives 2012: new environment” 14 March 2012. Mitigating settlement risk. What CLS delivers:

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CLS and its role in foreign exchange (FX) settlement

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  1. CLS and its role in foreign exchange (FX) settlement Jonathan Butterfield “Russian Rates Derivatives 2012: new environment” 14 March 2012

  2. Mitigating settlement risk What CLS delivers: FX settlement risk – the largest risk in FX – is mitigated by settling both legs of each trade simultaneously on a payment-versus-payment (PVP) basis Cross currency gross settlement on a PVP basis Minimises liquidity required to settle – reduced payments by 96% through multilateral netting Provides operating efficiencies and real time transparency to members Standard and robust globally consistent legal framework and operating rules Provides connectivity to the CLS ecosystem of major global banks Resilient Financial Market Infrastructure 2

  3. Who is involved - the CLS Ecosystem Oversight Committee of 22 central banks SWIFT (Network and messaging standards) CLS service delivery anddevelopment partners (e.g. IBM) CLS vendors (provide connectivity between Settlement Members and CLS) 17 RTGS systems 68 Nostros 57 Liquidity Providers 61 Members 27 Members offer third party services Over 14,000 active Third Parties

  4. Requirements for ruuble and all new currencies 4 4

  5. 4 Phases for the ruble Education November 2011 - CLS hosted a summit with the Bank of Russia February 2012 – Workshops at the Bank of Russia Meeting with NFEA - Seeking participation of local banks Initial meetings with interested prospective Settlement Members Engagement Letter of Intent from the Bank of Russia Diligence Execute plan agreed with the Bank of Russia to close gaps Finalize governance to progress to implementation Regulatory approval Changes to CLS systems Tests and trials Federal Reserve approval 5 5

  6. Local market participation is a key component Overseen by 22 central banks SWIFT (Network and messaging standards) CLS service delivery anddevelopment partners (e.g. IBM) CLS vendors (provide connectivity between Settlement Members and CLS) 17 RTGS systems Nostro Liquidity Provider Settlement Member Third Party 6

  7. How CLS works CLS is extended unique privileges by each of the 17 central banks of the supported currencies to enable using central bank funds CLS holds an account with each of the central banks Members (61) each have a single multi-currency account with CLS Funding and pay-out of net positions is conducted using a daily, defined schedule Members pay and receive funds through CLS’ central bank account in each currency via their own accounts or nostro bank accounts using timed payments 7

  8. How CLS works within the trade life cycle 8

  9. Thank you Please send inquiries to currencyprogram@cls-group.com For additional information on CLS, refer to www.cls-group.com

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