Continuous Linked Settlement (CLS) is a financial clearing system used mainly by banks to settle foreign exchange trades. The primary characteristic of CLS compared to other clearing systems is that it settles transactions on a "Payment versus Payment" basis, also known as PVP. When a foreign exchange trade is settled, each of the two parties to the trade pays out (sells) one currency and receives (buys) a different currency; PVP ensures that these payments and receipts happen simultaneously. Without PVP there is a (small) chance that one party could pay out without receiving, this is known as Settlement, or Herstatt risk.
CLS was created by many of the world's largest banks and began operation in September 2002. Since then it has rapidly become the standard for foreign exchange settlement between major banks and as of December 2004 is settles about 60,000 trades a day with a value of about US$ 1.2 Trillion.