BoC sets date for securities lending programme launch
25 September 2024 Canada
Image: Jeff_Whyte/stock.adobe.com
The Bank of Canada (BoC) has confirmed that the launch date of its securities lending programme (SLP) will be 2 October 2024.
As previously mentioned, the BoC will discontinue the current daily securities repo operation (SRO), with the final SRO to occur on 1 October 2024.
The SLP is designed to support the liquidity of Government of Canada (GoC) securities markets.
The SRO came into effect in July 2020, with the suspension of the bank’s SLP, to provide a temporary source of GoC nominal bonds and treasury bills for primary dealers to support liquidity in the securities financing market.
The BoC has updated the terms and conditions on its website to reflect the operational details and objectives of the programme.
Instead of making its holdings of GoC securities available against cash through repo in the case of the SRO, the bank will lend specific GoC securities that are in high demand and receive other GoC securities or fixed rate Canada mortgage bonds as collateral under the SLP.
The minimum bid fee for tenders in the SLP will be set at 15 bps, which is in line with the maximum bid rate for the SRO, which was 15 bps below the bank’s target for the overnight rate.
Prior to the launch of the SLP, the BoC will conduct some small value SLP trades with primary dealers to test the operation.
At the same time, the bank has updated the terms and conditions for the overnight reverse repo (ORR), as a counterparty’s limit in the ORR operation will no longer take their usage of the SRO into account.
At its discretion, the BoC may adjust the size, pricing, and other parameters of the programme to achieve its objectives.
The BoC says: “The bank has made significant investments in its systems to improve the efficiency of its operations and will collaborate with primary dealers to further enhance functionality and alignment with market standards.
“The bank continuously monitors market conditions and remains committed to providing the required support for the well-functioning of the Canadian securities financing market.”
As previously mentioned, the BoC will discontinue the current daily securities repo operation (SRO), with the final SRO to occur on 1 October 2024.
The SLP is designed to support the liquidity of Government of Canada (GoC) securities markets.
The SRO came into effect in July 2020, with the suspension of the bank’s SLP, to provide a temporary source of GoC nominal bonds and treasury bills for primary dealers to support liquidity in the securities financing market.
The BoC has updated the terms and conditions on its website to reflect the operational details and objectives of the programme.
Instead of making its holdings of GoC securities available against cash through repo in the case of the SRO, the bank will lend specific GoC securities that are in high demand and receive other GoC securities or fixed rate Canada mortgage bonds as collateral under the SLP.
The minimum bid fee for tenders in the SLP will be set at 15 bps, which is in line with the maximum bid rate for the SRO, which was 15 bps below the bank’s target for the overnight rate.
Prior to the launch of the SLP, the BoC will conduct some small value SLP trades with primary dealers to test the operation.
At the same time, the bank has updated the terms and conditions for the overnight reverse repo (ORR), as a counterparty’s limit in the ORR operation will no longer take their usage of the SRO into account.
At its discretion, the BoC may adjust the size, pricing, and other parameters of the programme to achieve its objectives.
The BoC says: “The bank has made significant investments in its systems to improve the efficiency of its operations and will collaborate with primary dealers to further enhance functionality and alignment with market standards.
“The bank continuously monitors market conditions and remains committed to providing the required support for the well-functioning of the Canadian securities financing market.”
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