What considerations are there for banks thinking of using Continuous Linked Settlement (CLS)?
Foreign Exchange Risk To what extent do you currently record and manage the settlement risk? How important is it for you? If you trade generally with larger banks you may feel that the real risk is small. Conversely, you may want to reduce your risk on smaller banks. Pressure From Trading Partners Trading partners may already be committed to CLS and request that you use CLS to trade with them. Some banks may decide to charge a premium for eligible trades outside CLS. Regulatory Environment Central Banks in many countries are seriously concerned about the risks inherent in foreign exchange settlement (amongst other things). There is pressure from them to reduce the risk, and penalties may be imposed on banks that do not. Changes To Procedure Differences will exist in the way deals are struck and settled when using CLS, even as a third party. A confirmation of the trade will have to be copied to your appointed Settlement Member at the time of the deal. Your settlement process will be dif
