This type of exposure—often called principal or settlement risk—occurs when one party delivers a currency but does not receive the counter‑currency. The risk is heightened because payments in different currencies may occur through different payment systems and at different times of day.

Historically, many of these principal exchanges were settled bilaterally between counterparties on a gross basis, leaving both sides exposed until the payments completed.

How Payment‑Versus‑Payment (PvP) Eliminates the Core Risk

CLS’s CCS service addresses that exposure by settling swap principal exchanges using payment‑versus‑payment (PvP). In a PvP system, the final transfer of one currency occurs only if the corresponding transfer of the other currency also occurs.

This means both sides of the trade settle simultaneously inside the CLSSettlement infrastructure. If either payment cannot be completed, neither side is released, effectively eliminating the risk that one party delivers funds without receiving the other currency.

For cross‑currency swaps—where principal exchanges can reach billions of dollars—bringing these payments into a PvP environment significantly reduces systemic settlement exposure in FX markets.

Integration With MarkitWire and CLSSettlement Workflows

The CCS service is designed to fit into the existing post‑trade processing ecosystem used by major banks.

Trades can be processed through OSTTRA MarkitWire, a widely used platform for post‑trade confirmation and lifecycle management of derivatives. Once the swap is confirmed there, the platform can route payment instructions for the swap’s principal exchanges directly into CLSSettlement.

This integration allows institutions to:

• Automate post‑trade processing of cross‑currency swaps
• Feed payment instructions into CLS without manual intervention
• Manage swap settlements alongside other FX obligations

By linking derivatives workflows to the same infrastructure used for spot and other FX transactions, the system reduces operational fragmentation and improves settlement reliability.

Multilateral Netting and Liquidity Savings

Beyond risk reduction, one of the biggest operational advantages of CLS is multilateral netting.

Instead of each trade being funded individually on a gross basis, CLS aggregates settlement obligations across participants and currencies. Offsetting payments are netted against one another before settlement occurs. This process can reduce the total funding required by participants by more than 96% compared with gross settlement.

For banks settling cross‑currency swap principal exchanges, this means:

• Lower intraday liquidity needs
• Reduced payment volumes
• Greater operational efficiency

The ability to combine CCS settlements with other FX obligations inside the same netting environment makes the service particularly attractive for large dealers with high transaction volumes.

Why More Banks Are Adopting PvP Infrastructure

The expansion of the CCS service comes as global FX activity continues to grow rapidly.

The Bank for International Settlements reported that global OTC foreign‑exchange turnover reached about $9.6 trillion per day in April 2025, a 28% increase from $7.5 trillion three years earlier.

As trading volumes rise, so does the amount of currency exposure moving through settlement systems. Policymakers and industry bodies have therefore pushed for wider adoption of PvP mechanisms as a core tool for mitigating settlement risk.

Industry initiatives—including those led by the Global Foreign Exchange Committee—are also tracking settlement exposures more closely to measure progress in reducing these risks across the FX ecosystem.

The Growing Role of Cross‑Currency Swaps

Cross‑currency swaps themselves are becoming more important in global financial markets. Banks, asset managers, and corporates use them for funding, hedging currency exposures, and managing balance sheets across jurisdictions.

Because these swaps involve large principal exchanges at the start and maturity of the contract, they create substantial settlement exposures if handled through traditional bilateral payment arrangements.

CLS reports strong growth in CCS activity routed into its settlement infrastructure, including rapid increases in the value of swaps submitted for settlement in recent years.

Why Bank Participation Matters

CLS is a network infrastructure: the more major banks that participate, the more transactions can be settled safely within the same PvP environment.

Bank of America’s adoption expands the pool of dealers able to route cross‑currency swap principal exchanges into the CLS system. As participation increases, more counterparties can benefit from:

• Simultaneous PvP settlement
• Multilateral netting across FX obligations
• Lower operational and liquidity costs

In practice, this means the impact of a single bank joining goes beyond its own operations. Each additional participant increases the share of global FX flows that can be settled in a coordinated, risk‑mitigating infrastructure.

The Bigger Picture for FX Market Stability

The move illustrates a broader shift in the FX market: bringing more types of transactions—including derivatives‑related payments—into centralized settlement systems designed to minimize principal risk.

As trading volumes expand and regulators emphasize stronger settlement practices, payment‑versus‑payment infrastructure like CLS is becoming a key foundation for maintaining stability and efficiency in global currency markets.

This type of exposure—often called principal or settlement risk—occurs when one party delivers a currency but does not receive the counter‑currency. The risk is heightened because payments in different currencies may occur through different payment systems and at different times of day.

Historically, many of these principal exchanges were settled bilaterally between counterparties on a gross basis, leaving both sides exposed until the payments completed.

How Payment‑Versus‑Payment (PvP) Eliminates the Core Risk

CLS’s CCS service addresses that exposure by settling swap principal exchanges using payment‑versus‑payment (PvP). In a PvP system, the final transfer of one currency occurs only if the corresponding transfer of the other currency also occurs.

This means both sides of the trade settle simultaneously inside the CLSSettlement infrastructure. If either payment cannot be completed, neither side is released, effectively eliminating the risk that one party delivers funds without receiving the other currency.

For cross‑currency swaps—where principal exchanges can reach billions of dollars—bringing these payments into a PvP environment significantly reduces systemic settlement exposure in FX markets.

Integration With MarkitWire and CLSSettlement Workflows

The CCS service is designed to fit into the existing post‑trade processing ecosystem used by major banks.

Trades can be processed through OSTTRA MarkitWire, a widely used platform for post‑trade confirmation and lifecycle management of derivatives. Once the swap is confirmed there, the platform can route payment instructions for the swap’s principal exchanges directly into CLSSettlement.

This integration allows institutions to:

• Automate post‑trade processing of cross‑currency swaps
• Feed payment instructions into CLS without manual intervention
• Manage swap settlements alongside other FX obligations

By linking derivatives workflows to the same infrastructure used for spot and other FX transactions, the system reduces operational fragmentation and improves settlement reliability.

Multilateral Netting and Liquidity Savings

Beyond risk reduction, one of the biggest operational advantages of CLS is multilateral netting.

Instead of each trade being funded individually on a gross basis, CLS aggregates settlement obligations across participants and currencies. Offsetting payments are netted against one another before settlement occurs. This process can reduce the total funding required by participants by more than 96% compared with gross settlement.

For banks settling cross‑currency swap principal exchanges, this means:

• Lower intraday liquidity needs
• Reduced payment volumes
• Greater operational efficiency

The ability to combine CCS settlements with other FX obligations inside the same netting environment makes the service particularly attractive for large dealers with high transaction volumes.

Why More Banks Are Adopting PvP Infrastructure

The expansion of the CCS service comes as global FX activity continues to grow rapidly.

The Bank for International Settlements reported that global OTC foreign‑exchange turnover reached about $9.6 trillion per day in April 2025, a 28% increase from $7.5 trillion three years earlier.

As trading volumes rise, so does the amount of currency exposure moving through settlement systems. Policymakers and industry bodies have therefore pushed for wider adoption of PvP mechanisms as a core tool for mitigating settlement risk.

Industry initiatives—including those led by the Global Foreign Exchange Committee—are also tracking settlement exposures more closely to measure progress in reducing these risks across the FX ecosystem.

The Growing Role of Cross‑Currency Swaps

Cross‑currency swaps themselves are becoming more important in global financial markets. Banks, asset managers, and corporates use them for funding, hedging currency exposures, and managing balance sheets across jurisdictions.

Because these swaps involve large principal exchanges at the start and maturity of the contract, they create substantial settlement exposures if handled through traditional bilateral payment arrangements.

CLS reports strong growth in CCS activity routed into its settlement infrastructure, including rapid increases in the value of swaps submitted for settlement in recent years.

Why Bank Participation Matters

CLS is a network infrastructure: the more major banks that participate, the more transactions can be settled safely within the same PvP environment.

Bank of America’s adoption expands the pool of dealers able to route cross‑currency swap principal exchanges into the CLS system. As participation increases, more counterparties can benefit from:

• Simultaneous PvP settlement
• Multilateral netting across FX obligations
• Lower operational and liquidity costs

In practice, this means the impact of a single bank joining goes beyond its own operations. Each additional participant increases the share of global FX flows that can be settled in a coordinated, risk‑mitigating infrastructure.

The Bigger Picture for FX Market Stability

The move illustrates a broader shift in the FX market: bringing more types of transactions—including derivatives‑related payments—into centralized settlement systems designed to minimize principal risk.

As trading volumes expand and regulators emphasize stronger settlement practices, payment‑versus‑payment infrastructure like CLS is becoming a key foundation for maintaining stability and efficiency in global currency markets.