CLS Group is a financial services company that provides settlement services for foreign exchange transactions. With over $1 trillion settled daily, CLS is a major player in the forex market. This article provides a comprehensive overview of CLS Group, its history, services, technology, membership, and impact on the forex industry.


CLS Group (originally Continuous Linked Settlement) was founded in 2002 in response to the growth of the foreign exchange market and the risks posed by asynchronous settlement. Prior to CLS, there was significant settlement risk when parties to a forex trade settled the transaction separately. If one party defaulted after receiving funds, the counterparty would lose on the trade.

CLS eliminates this principal risk by settling both sides of a trade simultaneously on a payment-versus-payment basis. This has brought more stability and efficiency to the forex market. CLS Group is used by over 60 of the world’s largest financial institutions across the globe. It has substantially mitigated settlement risk and provided over $1 quadrillion in risk-free settlement.

History and Ownership

The origins of CLS date back to the 1990s when major banks became increasingly concerned about settlement risk in the booming forex market. Settlement losses from counterparty defaults were a growing problem.

In 1997, the G10 central banks endorsed the concept of payment-versus-payment settlement. This led to the creation of CLS Group over the next several years with ownership shared between the private sector banks.

CLS Group Holdings was formed as the parent company in 2002 and is based in New York. The initial owners were large banks such as Citigroup, Goldman Sachs, and UBS. Over the years, ownership has expanded to include over 80 financial institutions. The company has also received investments from the private equity firms Advent International and CPPIB.

CLS Services

The primary service offered by CLS is settlement of foreign exchange trades, designed to eliminate the risk that one counterparty does not pay the currency they owe. This FX settlement occurs across 18 major currencies including USD, EUR, JPY, and GBP.

Beyond settlement, CLS also provides related services:

  • Netting – CLS nets down the value of offsetting trades between counterparties so the final settlement amount is lower. This increases capital efficiency.
  • FX trade confirmation matching – CLS confirms and matches the trade details submitted by both sides to ensure there are no discrepancies.
  • FX aggregation – CLS aggregates smaller trades into larger settlements to optimize efficiency.
  • CLSSettlement – This is the core settlement system that integrates payment-versus-payment settlement. It settles instructions from trades accepted for CLS settlement.

In addition to settlement, CLS offers tools to improve liquidity, data analytics, and compliance processes. The company is continuing to scale its capabilities to meet the complex needs of the forex market.

How CLS Settlement Works

The CLS settlement process is designed to eliminate principal risk by settling both legs of a forex trade simultaneously. Here are the key steps:

  1. Trade details submitted – Once an FX trade is executed between two parties, the trade details are submitted to CLS for matching and confirmation.
  2. Mismatches identified – CLS compares the details from both counterparties to find any discrepancies in the instructions. These are resolved before settlement.
  3. Settlement members fund accounts – Before settlement begins, members fund their CLS accounts with the currencies they will pay out.
  4. Simultaneous settlement – At the settlement time, CLS debits the payer’s account and credits the receiver’s account. This occurs simultaneously so neither party is exposed to principal risk.
  5. Funds paid out – Once the CLS accounts are settled, CLS pays out the net funds to the members’ commercial settlement banks to complete the transaction.

With synchronous, atomic settlement, CLS has vastly reduced the previous risks involved in settling forex trades separately. The CLS process leads to improved stability in the global forex market.

CLS Membership

CLS membership is open to financial institutions that actively participate in forex markets and meet certain eligibility requirements around creditworthiness, operational standards, and legal structure. There are two tiers of membership:

  • Settlement members – These members hold settlement accounts with CLS and can settle their own trades and trades on behalf of third-parties.
  • User members – These members submit trades through a settlement member to access CLS services. User members do not hold CLS settlement accounts.

Currently, there are around 140 members of CLS in total. The top settlement members include big banks like JP Morgan, HSBC, and Deutsche Bank that settle trillions in forex trades through CLS annually. User members are generally smaller regional banks or financial entities.

Members must meet strict compliance, risk management, and operational standards set by CLS in order to maintain a safe settlement ecosystem. However, some non-members can also access CLS through third-party agents that are members. Overall, CLS membership brings reliability, regulatory compliance, and risk mitigation around forex settlement.

CLS Technology

A critical aspect underlying CLS’s capabilities is the proprietary technology system that enables smooth payment-versus-payment settlement across currencies and time zones. Some key components include:

  • CLSNet – This is the core messaging platform that connects CLS to its members over SWIFT. Members use CLSNet to submit forex instructions.
  • CLSO – The central settlement engine that processes matching, netting, and then settlement through integrated RTGS systems.
  • SWIFT Integration – CLS uses SWIFT financial messaging to communicate with members for settlement instructions and confirmations.
  • Continuity site – CLS maintains a back-up data center to ensure settlement continues uninterrupted in any disaster scenario.
  • Monitoring – CLS monitors all components 24/7 and has advanced cybersecurity to guard against operational risks.

The reliability of CLS’s systems allows it to settle an average daily value of $8 trillion across 1.8 million instructions. The system can easily scale further to meet additional forex volume going forward.

Impact on the Forex Market

By providing synchronized settlement to eliminate principal risk, CLS has fundamentally changed how forex trading and settlement work. Here are some of the major impacts CLS has had on forex markets:

  • Reduced credit risk – With PVP settlement, credit risk is vastly reduced compared to traditional foreign exchange settlement through correspondent banking networks.
  • Increased liquidity – The reduction in settlement risk has removed barriers and freed up liquidity in the FX market. Daily FX trading volumes have expanded rapidly since the introduction of CLS.
  • Strengthened stability – By reducing knock-on effects from any single participant default, CLS has strengthened stability in the broader forex ecosystem.
  • Standardized processes – Settlement through CLS has standardized post-trade processes across the networks of member banks and helped reduce operational risks.
  • New technologies – CLS has pushed the adoption of new technologies like distributed ledgers that can optimize liquidity and settlement further.

Overall, CLS brings much-needed resilience, reliability, and risk reduction to global forex markets. It is now an indispensable financial market infrastructure supporting trillions in FX trading daily.


CLS provides an invaluable service to the foreign exchange market by enabling simultaneous settlement that eliminates principal risk between trading counterparties. It has become a core piece of the forex ecosystem relied upon by the largest banks and financial institutions for mitigating post-trade risks.

With its proprietary technology infrastructure and operational excellence, CLS will continue leading the drive to reduce risks and increase efficiency across forex markets. As forex trading expands in volume and complexity, CLS Group will remain at the cutting edge and ensure financial stability is maintained.