CLS

The CLS (continuous linked settlement) system operates as an international clearinghouse for foreign currency conversion transactions. The system was established in September 2002 by the world’s largest banks, with the aim of reducing foreign exchange settlement risk.

Activity in the CLS system is similar to activity in RTGS-type systems, but instead of settlement in a single currency, CLS makes settlement and conversion transactions simultaneously in various currencies.  The system provides settlement services in 18 currencies, with the central banks of the relevant countries directly connected to it through their RTGS systems.  The CLS system settles more than 50 percent of all foreign exchange conversion transactions in the world.

The Bank of Israel declared the CLS system as a “designated controlled” payment system on February 11, 2008. As such, and in accordance with the Payment Systems Law, payment instructions approved and carried out in the system are final and cannot be cancelled. 

The shekel began actively trading in the CLS system on May 26, 2008.  This completed an important part of the implementation of the Payment Systems Reform in Israel, enabling secure and final foreign currency conversions with the shekel.  It significantly reduced the conversion risks inherent in Israeli businesses’ activity with foreign counterparties, and increased the stability of those businesses.  The shekel’s inclusion among the world’s leading currencies, which are settled through the CLS, strengthened the Israeli currency and made it a convertible currency that is freely traded around the world.

The CLS system is owned by more than 70 global financial institutions, and is operated by the CLS Bank.  It is supervised by an international supervisory group that includes representatives from all countries whose currencies are traded in the CLS system, with the Federal Reserve serving as the lead supervisor.