Both legs or neither
A currency trade settles as two payments, one in each currency, often in different countries and through different systems. Payment versus payment ties them together. In the words of the BIS Quarterly Review of June 2026, a PvP system “ensures that the final payment of one currency occurs if and only if the final payment of the other currency occurs.”
Without that link, a bank can pay its side and then wait for money that never comes. That exposure has a name, Herstatt risk, after a German bank whose collapse in 1974 left its counterparties unpaid.
How much FX settles this way
The BIS asked currency dealers how they settled their trades in April 2025. Just over $5 trillion a day, or 36% of the average daily settlement, went through PvP, which the article says “eliminates FX settlement risk.”
A further $7.6 trillion, 54%, used methods such as netting that reduce the risk without removing it. More than $1.4 trillion, 10%, settled gross and bilaterally, fully exposed. The main reasons the dealers gave were a counterparty without PvP access, or a currency pair or trade type that a PvP system doesn’t take.
The PvP systems
The largest is CLSSettlement, run by CLS Bank since its launch in 2002.
As of June 2026 it settles 18 currencies: the Australian, Canadian, Hong Kong, New Zealand, Singapore and US dollars, the euro, pound, yen, won and Swiss franc, the Danish and Norwegian krone, the Swedish krona, and the Hungarian forint, Israeli shekel, Mexican peso and South African rand. The BIS notes that CLS is overseen jointly by the Federal Reserve Bank of New York and other central banks whose currencies it settles.
Smaller systems cover pairs that CLS doesn’t, according to the same article.
| System | Where | Since | Currencies |
|---|---|---|---|
| CHATS | Hong Kong SAR | 2000 | Hong Kong dollar, offshore renminbi, euro, Indonesian rupiah, Malaysian ringgit, Thai baht, US dollar |
| B3 Foreign Exchange Clearinghouse | Brazil | 2002 | Brazilian real, US dollar |
| CCIL | India | 2015 | Indian rupee, US dollar |
| Buna | United Arab Emirates | 2023 | UAE dirham, euro, Egyptian pound, Jordanian dinar, Saudi riyal, US dollar |
A trade in a pair none of them covers can’t settle PvP through these systems.
Linking systems that look nothing alike
Central banks are now testing PvP between payment systems built on different technology. On November 13, 2026 the Bank of England, the Monetary Authority of Singapore and the Bank of Thailand published Project Meridian FX APAC, in which a coordinating service settled both legs of a trade across an account-based test system and two tokenized ones.
Their executive summary says this “could support atomic payment-versus-payment (PvP) settlement across different wholesale settlement systems.” The work ran in test environments only.
What PvP doesn’t remove
The common mistake is to treat PvP as the end of every settlement risk. It removes principal risk, the chance of losing the full amount paid. It doesn’t make a failed trade free.
The BIS article separates PvP from a central counterparty, which takes on its members’ obligations, and says the PvP function “alone does not eliminate replacement cost risk.” If the other side defaults, both payments are called off, but the bank may have to replace the trade at a worse rate.