Continuous Linked Settlement
a.k.a. CLS
A system used by big banks to settle both sides of a currency trade at the same moment, so neither side pays without being paid.
Every currency trade has two payments: you send euros, they send dollars. If one side pays and the other collapses before paying back, the first side loses everything. That danger is called settlement risk, or Herstatt risk, after a German bank whose 1974 failure left counterparties unpaid.
Continuous Linked Settlement (CLS), launched in 2002, fixes this with 'payment versus payment': both legs settle together or not at all. A large share of global FX trades now settles through it.
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