Goldman Sachs and Morgan Stanley have implemented CLSNet, which is a bilateral payment netting service that operates on a distributed ledger technology (DLT) platform.
CLSNet, a product of foreign exchange settlement infrastructure firm CLS, will also be implemented by six additional entities North America, Europe and Asia.
The Bank of China (Hong Kong) has also agreed to join the service, which is a standardized and automated bilateral payment netting service for more than 120 currencies.
CLS has developed the new service with the support of buy-side and sell-side institutions. It will help to standardize and optimize the levels of payment netting in the FX market for trades not settling in CLSSettlement.
CLSNet will help decrease costs for market participants and increase liquidity in FX markets through standardizing and automating the calculation of payment netting.
The service is also compatible with certain principles of the FX Global Code of Conduct.
CLS chief strategy and development officer Alan Marquard said: “We are excited to be launching CLSNet, the first service of its kind to be operated on a DLT platform. Further, this offering demonstrates how we are using our unique, trusted position at the center of the FX market to solve industry challenges.
“A standardized and automated payment netting process will lead to improved intraday liquidity, reduced cost, improved operational efficiencies and ultimately support business growth.”
CLS has taken the support of IBM to develop the new services, which runs on the Linux Foundation’s Hyperledger Fabric blockchain framework.
According to CLS, the market participants will struggle with risk and operational inefficiencies due to lack of standardization and automation.
CLS will help clients to reduce risk and improve efficiencies. Its wide network and advanced market intelligence will allow the firm’s specialists to offer standardized solutions to real market problems.
Morgan Stanley fixed income division managing director Adam Josephart said: “CLSNet will deliver the standardization and automation needed for non-CLS settled transactions. We are delighted that Morgan Stanley is one of the early adopters of the service.”