Following this announcement, participation in the service will enable Société Générale to benefit from CCS’s optimised operational and liquidity features, with the overall aim of further reducing settlement risk and improving operational efficiency.
In addition, both companies will continue to focus on meeting the needs, preferences, and demands of clients and users in an ever-evolving market, while prioritising the process of remaining compliant with the regulatory requirements and laws of the industry as well.
CCS trades have significant settlement risk exposures due to the high value of the initial and final principal exchanges. Furthermore, settling these trades on a gross bilateral basis results in operational inefficiencies, as well as liquidity constraints.
In addition, the CCS services can be leveraged in conjunction with the post-trade processing platform MarkitWire in order to integrate CCS flows into CLSSettlement, which will allow participants to benefit from multilateral netting against all FX transactions. This process is expected to optimise liquidity, while also significantly reducing daily funding requirements.
According to the official press release, the growth in the service will also support the efforts of policymakers and regulators who promote broader adoption of payment-versus-payment (PvP) mechanisms as a meaning of reducing FX settlement risk, as well as systemic risk in the OTC derivatives market.
At the same time, the PvP settlement system, as well as the netting capabilities of the service will mark a positive and important step into Société Générale’s efforts to improve its foreign exchange operations and services.
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