Minutes of the London FXJSC Operations Sub-Committee Meeting – 7 June 2022


Date of meeting: 7 June 2022
Time: 2pm – 5pm | Location: Hybrid – Goldman Sachs and Videoconference

Item 1: Welcome and Apologies

John Blythe (Chair, Goldman Sachs) welcomed members to the FXJSC Operations Sub-committee meeting held at Goldman Sachs and via video conference. Mr Blythe welcomed guest presenters and observers Keith Tippell, Sally Pearson (CLS) and Sean Saunders (Northern Trust).

Item 2: Minutes of the 10 March meeting

The minutes of the 10 March 2022 meeting were agreed, with no comments raised by members.

Item 3: Market conditions including Ruble settlement challenges and impact on FX market

James Kaye (HSBC) explained that significant stress in Ruble settlements continues across the market following the Ukraine invasion. Market reaction; Seismic shift in volatility indices and currency markets; Gold prices rose with the flight to safety; A spike on 28th Feb exacerbated by inflation and rate rises; Liquidity expensive and difficult to manage; RUB extended holidays increased this divergence. The impact was cross-asset, not just the FX market with reverberations across Fixed Income (particular Securities) and Equity markets. The resultant operational challenges in the management of the Ruble settlement created operational intensity feeding through in volume and F2B work. Immediacy was to educate teams on Sanctions policy across different jurisdictions, recognising organisational risk appetite. James noted that the implementation of the sanctions had signified the need for clarity in sanctions implementation process including, scope and applicable laws. He said generally, high frequency of sanctions made implementation difficult, creating high levels of operational impact. He stated that implementation of these sanctions required additional resourcing in compliance departments to cope with increased queries, which across the market was hard to fill. There was also significant demand for new reporting requirements on counterparty names, among others. James explained that Ruble nostro activity had reduced over time relative to pre-sanctions times however, greater sanctions meant onshore and offshore liquidity became harder to manage and more expensive. James noted that settlement claims process would continue to run for some time before regaining normalcy. Overall members thought the market had reasonably handled the Ruble settlement challenge, but acknowledged the need for wider industry discussion on some of the emerging challenges.

Item 4: FXJSC Turnover Operational Efficiency and Risk Mitigation for non-CLS Settlement Currency Flows

Keith Tippell (CLS) explained that CLS Settlement supports 18 currencies and with potential to increase by 1 or 2 in the longer term. Mr Tippell was conscious that other approaches may be required for other currencies. He explained that CLS had focused most of its 2021 efforts on collaborating with some of their banks regarding PvPs settlement for a number of new target currencies. Keith noted that CLS had considered the disparity in different market operations as part of its evaluation of challenges of CLS uptake. He acknowledged that uptake of CLS service would require market collaboration including central bank support in those target currencies.

Mr Tippell explained that CLSNet is a distinct service focusing on STP, netting and operational risk mitigation for currency flows not processed by CLS Settlement. CLS was keen on attaining efficiency by pursuing feasible options that would translate into adoption. Mr Tippell stated that while it had taken some time to achieve, CLSNet adoption was slowly approaching critical mass primarily driven by on boarding of many of the largest global banks. He expressed the potential for a rulebook in the event of disruptions. Members discussed the challenges and noted the need for a standardised approach to crisis management.

Mr Tippell noted an increase in market interest, with some firms making enquiries about the CLSNet service. Members deliberated on the challenges facing CLSNet adoption noting the integration of platforms as a key challenge. Other factors include changes in budgets by potential organisations, Brexit, Covid-19 and generally the product being pitched at the wrong level. Members thought there was need for the buy side adoption of the product.

Item 5: ISO 20022 Target 2 Implementation

Sean Saunders (NTRS) presented on the implementation status of ISO 20022 Target 2 project. He noted that ISO 20022 was the key standard in the next generation of payments schemes. Sean mentioned that the platform would improve aspects like sanctions implementation given the changes. He explained that this was a significant change in payments operations, including message formats with notable increase in size of respective messages. Mr Saunders stated that “MT” messages and ISO messages would operate simultaneously during rollout. He explained that preparations were ongoing for industry testing adding that it had taken seven years to get to this stage. Among the prime functions of the system would be to sort out technicalities, which will in turn reduce challenges in sweeping arrangements. It is expected that correspondent banking will move to CBPR+ by 2025. T2 (the new real time gross settlement system) and TS2 (Target 2 securities) consolidation migration launch is set for November 2022.

Item 6: FCA Regulatory Update

Alan Barnes noted that the FCA are continuing to work with HMT and market participants on the impact of sanctions relating to the Russian invasion of Ukraine. Mr. Barnes flagged two recent Market Watch publications from the FCA. Firstly, Market Watch 68footnote [1], discusses gaps in market participants arrangements for using web-based platforms, in particular the arrangements for the recording of users. Secondly, Market Watch 69footnote [2] discusses firms’ market abuse surveillance arrangements under Article 16(2) of UK MAR and highlights the continuing importance of firms having a comprehensive a market abuse risk assessment in order to identify the potential risks and the necessary controls to address them.

Item 7: Education & Outreach

i. UK Finance Update

Andrew Rogan (UK Finance) updated members referencing the operational resilience supervisory statement deadline of 31 March 2022 on the implementation of the framework for UK financial institutions. He noted the requirement on identification of important business services, explaining the potential divergence for instance in derivatives versus other Foreign Exchange contracts, payments processes versus CHAPS among others. Mr Rogan stated that there was a need to work towards convergence, observing that impact tolerance was likely to be divergent as well. He explained the importance of the 2022 to 2025 period as the industry focused on embedding operational resilience in business as usual processes. He also observed that firms were taking investment decisions whilst considering operational resilience. Andrew noted that there was lack of knowledge in this respect particularly on the buy side of the market. He stated the need for significant work on scenario testing. He cited the need for clarity around SWIFT’s preparedness on operations resilience. Members acknowledged the need for a presentation from SWIFT on operational resilience including resolvability.

ii. Operational Manager’s Working Group (ECB OMG and GFXD) Update

Steve Forrest (UBS) referred to the settlement risk white paper, noting that it should act as an encouragement to the industry in using PvP. He explained that multiple standard settlement instructions have complicated settlement processes. He cited examples where recalling of payments made to wrong beneficiaries as challenging. He noted that simplification of these challenges and creating greater familiarity with currency cut offs was necessary.

Item 8: Any other business

Next FXJSC Meeting: Tuesday 7 September 2022


Adam Jukes – Deutsche Bank
Alan Barnes (Alternate) – FCA
Andrew Grice – Bank of England
Andrew Rogan – UK Finance
Boyd Winston – JP Morgan
Gail Smith – RBC
Gavin Platman (Deputy Chair) – Insight Investment
James Kaye – HSBC
Joe Halberstadt – SWIFT
John Blythe (Chair) – Goldman Sachs
John Hagon – CLS
Kerry Peacock (Deputy Chair) – MUFG
Mike Irwin – XTX Markets
Steve Forrest – UBS
Terri Van Praagh – Northern Trust

FXJSC Secretariat

Chris Hogan (Legal representative) – Bank of England
Sita Mistry – Bank of England
Timothy Mukopi – Bank of England

Guest attendees

Charlie Warburton – Bank of England
Daniel Fajuke – Bank of England
Keith Tippell – CLS
Sally Pearson – CLS
Sean Saunders – NTRS


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