Continuous Linked Settlement (CLS)

Continuous Linked Settlement is a real-time system that by which a number of the world's largest banks manage settlement of foreign exchange amongst themselves (and their customers and other third-parties), irrespective of time zones.

It has 17 eligible currencies under it right now. These are:

• Australian Dollar
• Canadian Dollar
• Danish Krone
• EUR Euro
• Hong Kong Dollar
• Israeli new shekel
• Japanese Yen
• Mexican Peso
• New Zealand Dollar
• Norwegian Krone
• Singapore Dollar
• South African Rand
• South Korean Won
• Swedish Krona
• Swiss Franc
• Pound Sterling
• United States Dollar

The process is managed by CLS Group Holdings AG and its subsidiary companies and include a settlement bank regulated by the Federal Reserve Bank of New York. The Group was formed in 1997 and the settlement system has been operational since 2002. As of February 2009, there were 73 shareholders and 62 settlement members as well as 4,576 Third Party participants (411 banks, corporates and non-bank financial institutions and 4,165 investment funds) that participate in the system.

CLS settles transactions on a payment versus payment basis, also known as PVP. When a foreign exchange trade is settled, each of the two parties to the trade pays out (sells) one currency and receives (buys) a different currency; PVP ensures that these payments and receipts happen simultaneously. Without PVP there is a (small, but with potentially devastating financial consequences) chance that one or more parties could pay away funds to another institution but not receive any reciprocal funds due (generally for reasons of credit-related default)—this is known as settlement risk, or Herstatt risk.

An additional benefit of the CLS system is the increased straight through processing capabilities.

Other services like CLS , there is TARGET and EBA.