CLS Bank International has extended the CLS settlement service to non-deliverable forward foreign exchange transactions.
CLS says the service offer a complete straight-through process - post execution to settlement - for NDF transactions.
The service goes live with six NDF-enabled CLS member banks and one third party customer. It covers 48 reference currencies, with the net proceeds settling in any of CLS Bank's 15 settlement currencies.
The new system will capture the various instructions for the life of the contract (opening and valuations), provide matching and reporting services and settle the net amount.
CLS says post trade processing of NDFs has traditionally been manually intensive, due to lack of standardisation and use of long-form confirmations. These factors contribute to higher processing costs.
The new service provides automation in an environment where little standardisation or automation currently exists, delivering more convergence and standardisation on a global scale, bringing increased efficiency and resulting in significant reduction in both cost and operational risk, says CLS.
"With a market size estimated at 10,000 trades a day, NDFs are used by those seeking to invest in and hedge exposure to foreign currencies that are not physically delivered," says Rob Close, president and CEO, CLS Bank and CEO, CLS Group. "By creating a new market standard that removes risk and automates the process, CLS will significantly reduce the cost of these transactions, making this hedging product for emerging markets simpler and more attractive to market participants."