GLOBAL - Custodians will now be able to settle fund manager clients' FX transactions thanks a new agreement with the CLS Group.
Transactions can now take place through the continuous linked settlement (CLS) foreign exchange system, run by CLS Bank International.
Currently, CLS Bank - launched on September 9 - settles over US$300bn (£192bn) per day in FX transactions between CLS Bank settlement members or their customer banks.
A significant proportion of the US$1.2trn a day FX market are transactions settled by custodian banks on behalf of fund manager clients. Estimates suggest that some 10% of all FX transactions are related to crossborder securities trading.
Chairman of CLS Group, Suzanne Labarge, said: “Cross border securities trading is accounting for a growing proportion of FX transactions and the straight through processing and elimination of the associated risk involved with these transactions is a priority for the market as a whole.”
The CLS Custody Working Group, representing 23 banks, will integrate the Custodian Fund Identifier system in order to identify a fund so that settlement can occur using CLS, thus achieving a higher degree of straight through processing and reducing the risks associated with using multiple fund identifiers.
CLS Bank will work to implement the change with a view to activating the service for fund managers by the end of 2003.
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