Citi Launches Domestic Settlement Service for Interbank Forex

Citi Launches Domestic Settlement Service for Interbank Forex

Citi t announced the release of its Domestic Settlement Service for interbank foreign exchange trades. The service intends to reduce settlement risk by simultaneously settling both sides of foreign exchange transactions and has been developed for use specifically by Central Banks in developing markets. Increasing global business implies growth in high value forex transactions and increased interbank settlement risk due to timing lags in payments on the two sides. Citi’s Domestic Settlement Service provides the simultaneous settlement of both sides of a foreign exchange trade with netted payments, helping to mitigate settlement risk and enhance operational efficiencies. Many countries lack the infrastructure capabilities required, typically in developing markets, and Central Banks of such countries are Citi’s target market. The group was commended for the service in The Banker’s 2007 Technology Awards.

Cámara de Compensación de Divisas de Colombia, Colombia’s Clearing House, established in 2007 under the risk control initiative of Colombian Central Bank, Banco de la Republica, is the first to launch Citi’s service, successfully settling interbank foreign exchange trades for its members. “Colombia is one of the few markets where most trades are same-day settlement,” says Juan Camilo Gutierrez, General Manager, Cámara de Compensación de Divisas. “Close to 50 financial institutions will participate in Colombia’s simultaneous settlement process in the next few months; the average daily trade volume in the market will surpass $1bn; and most spot transactions will be cleared and settled through the Clearing House by mid-2008. In addition to the benefits of risk reduction, our participants also value the 70% reduction in liquidity needed to settle a day’s trading—enabling them to settle hundreds of trades with many counterparties with a single funds transfer.”