CLS’ FX ADTV Drops 5.6% to $1.77 Trillion in August, Rises 6% YoY

Average daily traded volumes (ADTV) on Continuous Linked Settlement (CLS), a New York-headquartered provider of settlement and aggregation services for the forex industry, dropped 5.6% to US$1.77 trillion in August.

In July, the ADTV touched $1.88 trillion, rising 8% year-over-year (YoY).

However, while the average forex volume declined month-on-month in August, it climbed 6% from the $1.68 trillion generated in August 2021.

These details are contained in the CLS FX trade volume report for August 2022 shared with Finance Magnates on Friday.

FX Market Breakdown

According to CLS, on a month-over-month basis, its forex swaps
Swaps

Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of SwapsCommon types of swaps include interest rate swaps, commodity swaps, currency swaps, and debt-equity swaps.Interest rate swaps are used to hedge against interest rate risk and involve cash flows exchanged between two parties that are comprised of a notional principal amount. A financial intermediary or a bank is used for swaps but these are dependent upon both party’s comparative advantage.Commodity swaps use the exchange of a floating commodity price, with a predetermined set price for a specific period while crude oil is the most heavily swapped commodity. Meanwhile, currency swaps involve the exchange of principal payments of debt and interest that are denominated in different currencies. An example of a currency swap would be when the U.S. Federal Reserve conducted a swap with central banks of Europe during the 2010 European financial crisis.Used as a way to reallocate capital structure or refinance debt, a debt-equity swap deals with the exchange of debt for equity. For instance, a public traded company would issue bonds for stocks. Swaps are not exchange-traded instruments but rather customized contracts traded in an over-the-counter market between parties. While the swaps industry is primarily used by firms and financial institutions, retail traders have been known to participate although there is always a risk of counterparty’s defaulting on agreed-upon swaps.

Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of SwapsCommon types of swaps include interest rate swaps, commodity swaps, currency swaps, and debt-equity swaps.Interest rate swaps are used to hedge against interest rate risk and involve cash flows exchanged between two parties that are comprised of a notional principal amount. A financial intermediary or a bank is used for swaps but these are dependent upon both party’s comparative advantage.Commodity swaps use the exchange of a floating commodity price, with a predetermined set price for a specific period while crude oil is the most heavily swapped commodity. Meanwhile, currency swaps involve the exchange of principal payments of debt and interest that are denominated in different currencies. An example of a currency swap would be when the U.S. Federal Reserve conducted a swap with central banks of Europe during the 2010 European financial crisis.Used as a way to reallocate capital structure or refinance debt, a debt-equity swap deals with the exchange of debt for equity. For instance, a public traded company would issue bonds for stocks. Swaps are not exchange-traded instruments but rather customized contracts traded in an over-the-counter market between parties. While the swaps industry is primarily used by firms and financial institutions, retail traders have been known to participate although there is always a risk of counterparty’s defaulting on agreed-upon swaps.
Read this Term, spot and forward market volumes dropped 3%, 9% and 15% respectively in August.

Year-over-year, however, CLS’ forex swaps remained flat, accounting for US$1.23 trillion of the total traded volumes.

On the other hand, while spot trade volume climbed 17% YoY, bringing in US$429 billion, outright forward volume surged by 49%, contributing US$118 billion to the total traded volume.

“A year-on-year increase in overall volumes was not seen across all products,” CLS noted.

“Over the same [YoY] period, FX forward and spot volumes were both up noticeably by 49% and 17%, respectively, while FX swap volumes remained flat,” Keith Tippell, CLS’ Chief Product Officer, said.

In the spot market, traded volumes of currency pairs USD/JPY, USD/SGD and EUR/USD surged 56%, 49% and 23% year-over-year, respectively.

In terms of daily spot volumes, CLS said August 31st was the busiest day as US$606 billion changed hands on the day.

The majority of major currency pair volumes peaked on this day, the forex settlement
Settlement

Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer’s name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 business days or T+2 after the trade is executed, and for listed options and government securities it is usually 1 day after the execution. Conversely in Europe, settlement date has also been adopted as 2 business days settlement cycles T+2.Settlement ExplainedA settlement is also the process of the payment of an outstanding account balance, an open invoice or charge. The electronic settlement system is a relatively new construct that has only become a standard in the past thirty years.For example, in real estate finance, you have settlement when the funds are accepted, and the deed to the property is traders to the new owner. Settlement can also mean an adjustment or agreement reached in matters of finance or business. For example, we have settled with the bank or the credit card company. A number of risks arise for the parties during the settlement process. These are effectively managed by the process of clearing, which follows trading and precedes settlement. By extension, clearing involves modifying those contractual obligations so as to facilitate settlement, often by netting and novation.

Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer’s name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 business days or T+2 after the trade is executed, and for listed options and government securities it is usually 1 day after the execution. Conversely in Europe, settlement date has also been adopted as 2 business days settlement cycles T+2.Settlement ExplainedA settlement is also the process of the payment of an outstanding account balance, an open invoice or charge. The electronic settlement system is a relatively new construct that has only become a standard in the past thirty years.For example, in real estate finance, you have settlement when the funds are accepted, and the deed to the property is traders to the new owner. Settlement can also mean an adjustment or agreement reached in matters of finance or business. For example, we have settled with the bank or the credit card company. A number of risks arise for the parties during the settlement process. These are effectively managed by the process of clearing, which follows trading and precedes settlement. By extension, clearing involves modifying those contractual obligations so as to facilitate settlement, often by netting and novation.
Read this Term and aggregation service provider added.

Meanwhile, in March, CLS crossed the $2 trillion mark in terms of average daily trading volume.

The provider’s ADTV climbed from $1.982 in February to $2.125 trillion in March as demands across all of its forex instruments soared.

Furthermore, CLS Group reported a record $100 billion in average daily
notional value of the net calculations on CLSNet for the month of August.

CLSNet is a bilateral payment netting calculation service that caters to buy and sell-side
institutions, supporting 120 currencies.

It operates a centralized infrastructure for the institutions and provides a single common record
of their net payment obligations.

Through this method, the service streamlines post-trade matching
and netting processes.

Average daily traded volumes (ADTV) on Continuous Linked Settlement (CLS), a New York-headquartered provider of settlement and aggregation services for the forex industry, dropped 5.6% to US$1.77 trillion in August.

In July, the ADTV touched $1.88…