Morgan Stanley Wealth Management Australia Pty Ltd
Industry NewsNovember 29, 2018

Goldman Sachs and Morgan Stanley Join Blockchain-Powered Payment Netting Service

Goldman SachsMarket infrastructure provider of risk mitigation services to the global FX market CLS Group has gone live with investment banks Goldman Sachs and Morgan Stanley on its blockchain-powered service CLSNet.
CLSNet is a standardized, automated bilateral payment netting service for over 120 currencies operating on a distributed ledger technology (DLT) platform. The service will help financial services firms, such as investment banks Goldman Sachs and Morgan Stanley, to increase the levels of payment netting in the FX market for trades not settling in CLSSettlement.
Six additional members from North America, Europe and Asia, including Bank of China (Hong Kong) will join the service, more to come in the next few months. Market participants are being added to the blockchain-powered service in order to reduce costs and increase liquidity in FX markets.
Alan Marquard, Chief Strategy and Development Officer, CLS, commented: “We are excited to be launching CLSNet, the first service of its kind to be operated on a DLT platform. Further, this offering demonstrates how we are using our unique, trusted position at the center of the FX market to solve industry challenges.”
Alan Marquard, Chief Strategy and Development Officer, CLS
Alan Marquard, Chief Strategy and Development Officer, CLS

The service, which supports compliance with certain principles of the FX Global Code of Conduct, is expected to improve intraday liquidity, reduce costs, improve operational efficiencies and ultimately support business growth thanks to its standardized and automated payment netting process.

Built together with IBM, CLSNet runs on the Linux Foundation’s Hyperledger Fabric blockchain framework. The company aims to leverage the valuable insights obtained in the collaboration with IBM to further explore DLT architecture in order to create greater efficiencies and reduce costs for clients.
Adam Josephart, Managing Director, Fixed Income Division, Morgan Stanley, said: “CLSNet will deliver the standardization and automation needed for non-CLS settled transactions. We are delighted that Morgan Stanley is one of the early adopters of the service.”
Marie Wieck, General Manager, IBM Blockchain
Marie Wieck, General Manager, IBM Blockchain

The Bank of China (Hong Kong) was added to CLS’ blockchain-powered service. Barry Lo, General Manager, Bank-wide Operation Department of Bank of China (Hong Kong), commented: “We take great pleasure in participating in CLSNet, which will enhance operational efficiency in trade matching and payment netting for non-CLS settled currencies such as CNH, and strengthen our risk management. This underscores our strong commitment to driving Fintech innovation and represents a major step forward in the application of new technology in our businesses.”

Marie Wieck, General Manager, IBM Blockchain, said: “Since we first pioneered the use of blockchain in the FX market nearly three years ago, IBM has been working hard with CLS on the development and deployment of CLSNet as the first post-trade production deployment of blockchain technology in a global market utility. With CLSNet now in production with two of the world’s largest banks, for a major market function, it is a testament to the ongoing maturity of blockchain technology and the value that it can deliver in practice.”
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