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Welcome to the Citibank® CLS™ Settlement Services Newsletter! Ever since its long-awaited launch on September 9, 2002, CLS has been building a record of success in reducing settlement risk in the foreign exchange market. Volumes and values settled via CLS are ramping up rapidly, and new names are added to the CLS participants list every week. The CLS triumph has set in motion many third party participants, who have decided that there was no need to stand by to "wait and see" how things would work out - because they've been working out so well. We'll be publishing this newsletter on a quarterly basis to help keep you abreast of the latest CLS Bank initiatives, CLS industry trends and Citibank's ongoing efforts to enhance product offerings and improve quality of service. You'll also get information on articles our CLS experts have published and where they've been quoted in the press. And we'll also provide you with links to informative Web sites.
CLS Bank has recorded remarkable growth in volume and value. The daily average volume climbed up steadily to more than 67,000 sides in March, and the gross value settled per day reached $800 billion. For the first time on a non-US holiday, e.g., March 19, 2003, the system settled over $1 trillion, with a total of 81,000 trade sides. Among the sixty-seven CLS shareholders, fifty-two are live as settlement members and three as third party participants. CLS Bank is launching a string of major initiatives this year:
In order to implement these initiatives, several key application releases are underway designed to make the CLS plan a reality. Release 1.14 focuses on functional and performance enhancements in gateway and SWIFT™ Net, and has already been completed on the CLS core system. Release 1.15 will target the operational readiness for introducing four new currencies, and Release 1.16 will enhance functional capabilities of mapping changes to facilitate custody foreign exchange settlement. CLS achieved 100% straight through processing, except for one day, March 25, 2003, when a database error prevented the system from writing records and disrupted the service. The good news is that the vast majority of resubmitted trades were settled the next day, and at no time was any participant ever at risk of losing its principal. The event also proved the quality of the CLS contingency. In addition to CLS Bank's contingency activities, Citibank supplied clients with all necessary guidelines, so they knew what process to follow and how to approach their counter parties to resolve compensation issues. We also helped third party clients resubmit unsettled trades, which were all settled on the next value date.
Citibank is emerging as a market leader in providing CLS Settlement Services, ranking the number one in terms of client mandates and live clients. Citibank has seven live third party clients today, including WestLB AG (London). In the first quarter of 2003, Citibank reached a milestone by settling an accumulative gross value of $1 trillion for third party clients. Citibank is the leader among settlement providers with 30 mandates and is attracting high-volume foreign exchange players in the market. To embrace CLS Bank's initiatives, Citibank is gearing up toward operational readiness for the introduction of four new currencies, and developing solutions for corporations, custodian banks and fund managers. We are actively soliciting input from clients with regard to custodian foreign exchange. We encourage you to provide your input regarding the kind of solution that would best meet your needs. In addition, Citibank is working closely with our application vendor to add and enhance capabilities based on our clients' feedback. The enhancements, ranging from front-end to matching and reporting, are expected to provide a more flexible and smoother user experience for clients. A major release is scheduled for the middle of this year, which will deliver key capabilities such as gross settlement and support for corporate payments.
FX Week, March 3, 2003, headline: "Citi Triumphs in Asian CLS" "Citi appears to be winning the battle for third party CLS business in Asia. The bank last week signed up its fourth client in Taiwan alone…Citi has about eight clients in total in Asia, including banks based in Hong Kong and Japan, as well as Taiwan. The bank attributed its success in the region to its ability to offer on-the-ground support." FX Week, March 24, 2003, headline: "Merrill to Settle its Forex Trades via Citi" "Citi has won a coveted deal to settle Merrill Lynch's forex trades. The contract was signed at the end of 2002, said Citi's CLS project manager, Michael Knorr, although both banks have kept quiet until now." FX Week, March 24, headline: "Payments banks in CLS Lead" "Banks with traditionally strong payments businesses are winning the race for CLS third party clients, according to a consulting firm Capco These are the banks that dominate the "Tier One" of CLS third party providers. Top provider is Citi with 25 mandates." Risk Waters Group, Third Party CLS Supplement, Spring 2003, headline: "Who's Winning" "The top 10 third party providing banks by number of client banks signed: Citi tops the list…" Risk Waters Group, Third Party CLS Supplement, Spring 2003, headline: "How do clients choose their 3rd party service provider?" "As a whole new industry grows around the provision of third party CLS, the importance of relationships in determining choice of settlement member is proving to be paramount. Citi, which has signed up more third party clients than any other bank, attributes its success in the field to this factor: 'Citi's on-the-ground presence for relationship and implementation support, and strong product expertise were absolutely critical in gaining our clients' confidence,' said Jerry Chen, head of Financial Services for Citi in Taiwan." Authored Articles with a focus on CLS for corporate clients: Institutional Investor, Guide to Foreign Exchange as an Asset Class, February 2003, titled "Embracing CLS as a Strategic Treasury Management Tool" European CEO, March 2003, titled "A New Way to Settle FX Transactions - Reaping the Benefits of CLS" And those articles with a focus on CLS for financial institution clients: Banking 2000, Vol 3, 2002, titled "CLS: What Custodians Need to Know and Do" Also published on the CLS-Group Web site Banking 2000, Vol 2, 2003, titled "Facing the CLS Liquidity Challenge"
Please visit our Web site, where you will find a full array of services Citibank delivers to banks, broker dealers, insurance companies, and other financial intuitions. For the latest CLS Bank information, visit http://www.cls-group.com The Bank of International Settlement provides a useful link to access more than 130 central bank Web sites around the world http://www.bis.org/cbanks.htm
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