With this in mind, the CPSS will continue to closely monitor progress over the next year for any signs of slippage. BIS Review 60/1997  -5-  The search by individual banks for efficient ways to reduce their foreign exchange settlement risk has brought about important progress at the industry-group level as well. The Allsopp report noted the efforts of FXNET, S.W.I.F.T, ECHO, Multinet, and the Group of 20 banks to offer various types of risk-reducing services, and these ongoing efforts are very encouraging. Some banks are also exploring the elimination of settlement risk altogether by shifting the market to trades that simply settle the gain or loss associated with exchange rate movements -- called “contracts for difference” -- instead of requiring delivery of the underlying currencies. We are well aware that many market participants are currently debating what constitutes the most efficient multi-currency netting and settlement services. While there will be potential winners and losers, I believe that the market as a whole should ultimately benefit from this rigorous competition. At the same time, settlement risk reduction should not be used to justify the concentration of market power. The G-10 central bank governors have long been on record in favor of fair and open access to services that permit participation by a broad range of institutions, consistent with the prudent management of risk.
Our collective efforts, along with developments in information technology and risk management techniques, have already contributed to improved market stability. The growing, and successful, commitment of central banks to the achievement of price stability as BIS Review 60/1997  -7-  their primary goal is another crucial and positive contribution toward market stability. Moreover, where we as central banks see gaps that develop in the global financial system, as we did in the areas of market risk and settlement risk management, we play the role of facilitator to private sector solutions. As central bankers, we tend to view our role in the global financial markets as ensuring that the necessary infrastructure is in place to promote well-functioning markets for all players. Then we step aside and let the markets take care of themselves. BIS Review 60/1997