CLS Group, a leading provider of risk management and operational services for the global foreign exchange market, has revealed its plan to release a payment netting service, CLS Netting, using distributed ledger technology (DLT) based on Hyperledger Fabric.

The service will be for buy-side and sell-side institutions' FX trades that are settled outside the CLS settlement service. Participants will be able to submit FX instructions for six products, including non-deliverable forwards (NDFs), and 24 currencies over existing SWIFT-based channels. They would also be able to connect directly to the platform via a highly secure, permissioned distributed ledger, administered by CLS.

"CLS Netting is a critical component of our strategy to deliver a comprehensive suite of post-trade and risk mitigation services for the entire FX market”, David Puth, CEO of CLS, said.

The DLT platform for CLS Netting will be built using Hyperledger Fabric – an industry-accepted, open-source solution. According to the official release, CLS, a founding member of the Linux Foundation's Hyperledger Project, is collaborating with IBM to help ensure that the platform meets the requirements necessary for delivering a resilient, secure, and scalable service.

"By bringing our expertise and connectivity across post-trade FX, our never-ending focus to improve security and resilience and the innovation of DLT together, CLS Netting will offer a solution that can be used by the broadest range of FX market participants in a safe and efficient manner”, Tom Zschach, Chief Information Officer at CLS, said. “Working with IBM to deliver CLS Netting using an open-source DLT solution will ensure the appropriate levels of confidentiality, security, standardization, scalability and flexibility required to create a meaningful network effect across the financial industry."

Subject to receiving the necessary approvals, CLS will deliver the service in a phased approach. The first phase will deliver a payment netting service for FX spot, forwards, NDFs, swaps, tomorrow/next day and same-day trades across the 18 currencies CLS currently settles, as well as the Chinese renminbi (offshore), Russian ruble, Polish zloty, Turkish lira, Thai baht and Czech koruna. Following the delivery of phase one, CLS will expand the service to include more currencies and attributes.

Several market-leading institutions have committed by way of agreement to support the release of CLS Netting, which includes Banco Actinver, Bank of America, Bank of China - Hong Kong, Bank of Tokyo-Mitsubishi UFJ, Citibank, FirstRand, Goldman Sachs, Goldman Sachs Asset Management, HSBC, Intesa Sanpaolo, JPMorgan Chase, Morgan Stanley, Neuberger Berman and Northern Trust.