CLS Services Ltd. of London said it will suspend the operations of Exchange Clearing House Ltd., a multilateral foreign exchange netting service it acquired in 1997.
CLS Services, a group consisting of the world's top foreign exchange banks, bought the service, known as Echo, and another multilateral netting company, Multinet International Bank, with the idea of combining them to attract substantial forex volumes.
Multinet, formed in 1989 by Chase Manhattan Corp. and the former First Chicago Corp., also will be "dissolved," according to a source.
CLS' aim was to offer risk-mitigating multilateral netting services through Echo and Multinet until CLS Bank, a proposed settlement bank in New York, became operational in 2000. CLS Bank, is to be connected to the central banks of most major countries, would eliminate forex risk entirely with simultaneous, real-time currency exchanges.
CLS Services concluded that Echo, even when combined with Multinet, would not have enough volume to be commercially viable anytime soon. It processed about 1,000 transactions daily.
"The decision to suspend the Echo service has been a difficult one," said Phil Lynch, chief executive officer of Echo and chief operating officer of CLS Services.
Echo was formed in 1995 by 16 users in eight countries. It is now used by 24 banks, including ABN Amro Holding of Amsterdam, Barclays Bank PLC of London, Hongkong and Shanghai Banking Corp., and Industrial Bank of Japan Ltd.
"We had no U.S. banks at this point," Mr. Lynch said.
The service's suspension dates will be coordinated with users..
