The leaders of a much-anticipated and immensely complicated effort to build a global foreign exchange settlement system are considering whether its launch date needs to be put off a third time.

The project, Continuous Linked Settlement, aims to reduce banks’ risk of executing global foreign exchange transactions by settling both sides of such transactions simultaneously. The effort would eliminate exposures — heightened when FX transactions occur over different time zones — that can amount to billions of dollars between large counterparties when there is a gap in time between when currencies are bought and sold.

The project germinated in meetings of a group major foreign exchange trading banks known as the Group of 20, or G20. The result of their efforts to develop a private-sector solution to the problem of settlement risk was the 1997 formation of CLS Services Ltd., based in London, New York, and Japan. Its CLS Bank subsidiary was established to simultaneously post the transfer of assets on its books.

The difficulty of building a simultaneous payment-versus-payment matching system, and then connecting it to the 57 banks that are shareholders in the system, is behind the delays, said Keith Gold, marketing director for financial services at International Business Machines Corp. in Europe. IBM was hired in 1998 to build CLS’ systems and data infrastructure.

“We are talking about a project that is quite advanced in business functions and technology,” Mr. Gold said. “Experienced bankers would say this thing is like eating an elephant: You’ve got eat it in very small mouthfuls and it takes a long time.”

Once continuous linked settlement is fully implemented, CLS Bank is expected to settle well more than half of the global foreign exchange trading volume — about $3 trillion a day — in seven major currencies.

But the going has been tough.

The CLS system initially was slated to be up and running by June 2000. A less aggressive timetable was unveiled at the September 1999 Sibos conference in Helsinki, Finland, calling for an Oct. 2, 2000, start date. Only three months later the project was pushed back again to the fourth quarter of 2001, where it stands — for now.

CLS officers are in discussions with IBM about the possibility of postponing the launch date yet again. The group plans to announce by the first week in February if another delay will occur.

To get the project back on track, CLS Services and CLS Bank in June brought in Joseph De Feo as the new chief executive officer.

Mr. De Feo was one of the founding directors of the G20 planning group while at London’s Barclays Bank, where he was director of systems and operations. He previously had been director of group systems and operations at Morgan Grenfell and president/CEO of The Open Group, a U.K. organization that campaigns for more cooperation between suppliers and buyers of information technology.

One of Mr. De Feo’s first moves was to organize joint workshops between CLS Services, IBM, and the Society for Worldwide Interbank Financial Telecommunication, the bank-owned communications company providing the messaging capabilities for the system, so they could “work in a much more collaborative basis,” Mr. De Feo said.

He also structured CLS Services so that it operated as a company rather than as a project, and brought in a new management team that has tackled issues such as pricing and the company’s capitalization.

“The board recognized in the spring that the CLS management was not performing to a level that was adequate to the challenges of the project and the potential of the infrastructure to serve the industry,” Mr. De Feo said. “They did not have the banking experience you would have thought you would have wanted to put together something like this. In six months we have been able to build a credible management team and begin the process of building the bank.”

Mr. Gold said that at first, the prospect of a new CEO had been “very worrying.” But “the caliber of individuals that came in has been so great, it has been very reassuring,” he said. “The level of experience that has been brought into the team at this late stage has been very useful.”

If the current schedule sticks, CLS Bank will go live with about 20 of its members in the fourth quarter and will bring other shareholders online over time. The bank eventually will take on third parties, Mr. De Feo said.

“We have a commercial incentive to bring third-party business in as quickly as possible, and I hope to bring them on within a quarter of going live,” he said.

Mr. Gold blamed the delay on technical issues that arose in testing. The trickiest hurdle is that the settlement infrastructures of member banks must be integrated and upgraded to accommodate real-time settlement.

“Whenever you bring together a central organization like CLS Services and a bunch of the most senior bankers from around the world and try to integrate that, you have no idea what you’re going to come up,” Mr. Gold said. “Each bank has different requirements as far as testing is concerned.”

In August, about half of 115 banks worldwide told Opinion Research Corp. that they believed the launch of CLS would be delayed. One-third with assets of less than $25 billion said they thought the target date would be met. Sixty percent of those with assets of more than $25 billion said they believed the date would hold.

Sixty-nine percent of the respondents said they believed the delay would be no more than three months and 87% said they thought it would last no more than six.

Whitman Knapp, managing director of Princeton, N.J.-based Opinion Research, said, “While there is concern about CLS, it probably isn’t anything more than could be expected of a project of this size and complexity.”

Rajeev Agarwal, director of commercial banking at TowerGroup, said the system CLS is trying to build will revolutionize the centuries-old practice of currency settlement.

While delays are normal, he said, the original schedule for this project was “way too aggressive, considering that nobody had experience in such complicated real-time settlement services.”

He speculated that the optimistic timetable could have been a marketing decision to encourage more banks to become equity investors.

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