SocGen Joins CLS for Cross Currency Swaps

Société Générale has deepened its business with CLS by going live on the settlement service provider’s cross currency swaps service.

CLS observes that cross currency swaps trades have significant settlement risk exposure due to the high value of the initial and final principal exchanges. In addition, settling these trades on a gross bilateral basis results in operational inefficiencies and liquidity constraints. It explains its service can be used in conjunction with post-trade processing platform MarkitWire to integrate workflows into CLS Settlement, allowing participants to benefit from multilateral netting against all FX transactions.

This not only optimises liquidity but also significantly reduces daily funding requirements, CLS says, adding the cross currency swaps service has seen “exponential growth” over the past year, with values up 87% in Q3 2024. CLS does not provide an absolute value for the value settled, but it says the growth also supports the efforts of policy makers and regulators who promote broader adoption of payment-versus-payment (PvP) mechanisms as a means of reducing FX settlement risk and, more generally, systemic risk in the OTC derivatives market.

“Participation in the service underscores its effectiveness in enhancing operational and liquidity efficiencies for cross currency swap trades,” says Lisa Danino-Lewis, chief growth officer at CLS. “The growing adoption of this service as well as the growing values submitted indicate that FX market participants are actively pursuing innovative solutions to further reduce settlement risk and improve operational efficiency.”

Pierre-Jean Benazech, global head cross currency swaps trading at Société Générale, adds, “We look forward to leveraging CLS’s cross currency swaps service to optimise liquidity and

mitigate settlement risk. The unique PvP settlement system and netting capabilities mark a positive step forward in our efforts to optimise our foreign exchange operations.”