TMX and Clearstream announce tri-party repos in new Canadian CMS

Tri-party repos will be especially important following the cessation of the Canadian Dollar Offer Rate (CDOR) on 28 June 2024.

TMX Group and Clearstream have together developed and launched the new Canadian Collateral Management Service (CCMS), which facilitates the optimization and collateralization of securities finance activities throughout the Canadian market and provides exclusive domestic tri-party repo capabilities to increase liquidity and minimise exposure risk.

BMO, CIBC, RBC, Scotiabank, and TD, conducted inaugural trades via the first tri-party repo solution in Canada ahead of the cessation of the Canadian Dollar Offer Rate (CDOR).

Tri-party repos for enhanced liquidity and risk management

Tri-party repos provide a viable investment alternative for market participants seeking liquidity and to manage risk exposure. This will be especially important after the disappearance of Banker’s Acceptances (BAs) following the cessation of the Canadian Dollar Offer Rate (CDOR) on 28 June 2024.

CCMS will help market participants solve legacy technical challenges and operational limitations by automating the end-to-end lifecycle of a repo trade, optimising collateral within the market and truly democratising the repo market.

The first live tri-party repo transactions serve as a crucial enabler for the cessation of BAs, as well as an efficient platform to manage collateral within a T+1 settlement environment. CCMS will also be extending its services to corporate cash tri-party repo for the first time in Canada with subsequent expansions into securities lending and the use of equities collateral later in the year. Additionally, further automation capabilities will be enabled over the coming months.

“Ever-changing collateral demands of modern markets”

Harri Vikstedt, Senior Policy Director, Bank of Canada and Co-Chair, Canadian Infrastructure and Market Practices Advisory Group (CIMPA), said: “The introduction of CCMS will promote a well-functioning money market and modernise the Canadian repo landscape. It will help the development of an active two-sided term repo market which will support liquidity in cash products.”

Nicholas Chan, MD and Head, Financial Resource Management, BMO Capital Markets and Co-Chair, Canadian Infrastructure and Market Practices Advisory Group (CIMPA), said: “The development of a tri-party repo service represents an advancement in the evolution of liquidity management in Canada, leveraging technology to optimise efficiency, risk management and collateral eligibility in the Canadian market.”

Marton Szigeti, Head of Collateral, Lending & Liquidity Solutions, Clearstream, said: “As the financial landscape evolves towards faster and more efficient markets, we stay committed to empowering our clients with reliable and scalable state-of-the-art solutions. Our Canadian Collateral Management Service ensures that our clients can navigate changes like the shift to T+1 with confidence, enabling them to stay ahead in an ever-evolving market environment. We look forward to continuing to anchor and grow our support for the domestic funding and financing market together with TMX Group.”

Steve Everett, Head of Post Trade Innovation, TMX Group, said: “Through this collaboration with Clearstream to develop a tailored mobility and liquidity solution for Canada’s secured finance sector, TMX Group demonstrates its commitment to deliver innovative, market driven solutions that help to make markets better. The CCMS will enhance our clients’ capacity to adapt to the ever-changing collateral demands of modern markets while facilitating the expansion of repos as a viable investment avenue for both Canadian buy and sell-side participants. As the Canadian market moves towards T+1, CCMS will also play a pivotal role in supporting this critical transition.”