Investment banks Morgan Stanley and Goldman Sachs become the first companies to make use of CLS’s Blockchain-based payment netting service.
Blockchain payment service finished after two years
CLS, which is a bank-owned currency trading utility in partnership with tech giant IBM has finally launched their blockchain-based payment netting service. The service was launched following two years of intense development.
Goldman Sachs and Morgan Stanley, two of the biggest investment banks in the world become the first to use the newly launched CLSNet. The young Blockchain-based service has already recorded six participants in different continents including North America, Europe, and Asia. CLS and IBM announced that the Bank of China which is based in Hong Kong will join the community over the next few months.
While commenting on this latest development, Ram Komarraju, managing director for technology stated that the system is fully functional at the moment. “We have matched and confirmed the first transactions and successfully issued a netting report to the counterparties” he added.
Even though CLS is still not popular, the company has been able to provide foreign exchange, or forex, markets over the past few years. The company which has been around for 16 years now is known for mitigating risk for participating banks as they offer payment vs. payment service. This service makes it possible for both sides of a trade to be completed simultaneously.
CLS improving its services
Despite its success, CLS is looking to solve the current problems affecting the forex market including the absence of standardization and automation. IBM and CLS have recognized some of the issues affecting the industry and is rolling out services to change all that.
Adam Josephart, managing director of the fixed-income division at Morgan Stanley, stated that “CLSNet will deliver the standardization and automation needed for non-CLS settled transactions.”
Josephart wasn’t the only one impressed with CLSNet, with Barry Lo, general manager for the bank-wide operation department of Bank of China in Hong Kong echoing the same sentiment. Lo stated that “CLSNet in will enhance operational efficiency in trade matching and payment netting for non-CLS settled currencies such as CNH [the offshore version of China’s renminbi], and strengthen our risk management.”
CLSNet which was recently launched currently supports more than 120 fiat currencies. It was developed with the aim of standardizing and increasing the level of payment netting presently available in the forex market. The platform was also established in collaboration with buy-side and sell-side institutions.
Alan Marquard, chief strategy and development officer at CLS, commented that “A standardized and automated payment netting process will lead to improved intraday liquidity, reduced cost, improved operational efficiencies and ultimately support business growth.”
CLS exploring Blockchain payment for two years now
Even though CLSNet was recently launched, CLS and IBM have been working on the platform for two years now. CLSNet was developed on the Hyperledger Fabric blockchain, with the platform now having clients including Bank of America, Bank of China, Bank of Tokyo-Mitsubishi UFJ, Citibank, Goldman Sachs, JPMorgan Chase, and Morgan Stanley.
Even though CLS has been working with IBM, the tech giant is not the only major investor. Major enterprise DLT vendor, R3 invested $5 million to the company back in May, but R3’s platform will not be used for the services that CLS will offer, Komarraju added.
He stated that “Our investment in R3 has no impact on the future development of our products using Hyperledger Fabric, as we do not believe that DLT should be a ‘one-network universe. We believe that the industry will benefit from a choice in providers, which is why we have chosen to align ourselves with two key providers, R3 and IBM, in the DLT space.”
IBM and CLS have enjoyed their collaboration and have expanded on it. The two companies announced earlier this summer that they would develop a proof of concept for LedgerConnect, which would be a financial blockchain app store. The app store will offer DLT services for KYC processes, sanctions screening, collateral management, derivatives post-trade processing and reconciliation and market data.