CLS, a market infrastructure group delivering settlement, processing and data solutions, and NEX, a financial technology company at the centre of the global markets, are extending the triReduce CLS FX service to third parties.
Banks, funds, non-bank financial institutions and multinational corporations that settle in CLSSettlement through a settlement member are now able to join the compression service, benefiting from reduced counterparty exposures and operational risk mitigation.Third parties will participate in the same compression cycles as CLS settlement members. After a compression proposal has been accepted, third parties will process the results of compression through their settlement members.
NEX’s triReduce and CLS pioneered the triReduce CLS FX service to provide risk mitigation services for the global FX market for non-cleared OTC derivative trades. The service combines CLS’s infrastructure and market connectivity with triReduce’s compression expertise.
The service has compressed over USD6 trillion notional to date and its user base has continued to expand, with an additional six banks signing up in recent months. As FX market participants seek means to reduce their risks and as banks understand the benefit of reducing their leverage ratio in connection with the Basel III standards, CLS and NEX anticipate that participation and volumes will continue to grow.
Alan Marquard, Chief Strategy and Development Officer at CLS, said: “The compression service has achieved impressive growth over the past year, and we continue to see high levels of participation. It has always been our aim to extend the service to third parties, and there is strong demand for compression of FX forwards and swaps.
“Working with NEX, we are pleased to bring the benefits of compression to a wider community. In particular, banks impacted by Basel III regulation will benefit from effective management of leverage ratios and significant risk reduction.”
Peter Weibel, CEO of triReduce, commented: “Over the last six months, FX compression volumes have more than doubled due to strong interest from banks participating not only with their house accounts but also with their prime brokerage businesses. We are delighted to work closely with CLS to offer the compression service now to third parties and expand the pool of compression opportunities for the industry.”