Canada’s Government Bond Market Begins Trial of New Settlement–Fail Fee Framework

New monitoring system will calculate hypothetical penalties on failed Government of Canada bond and T–bill trades, with actual fees deferred during the initial trial.

The Canadian fixed–income market is beginning a trial designed to improve the settlement of Government of Canada securities by introducing a framework that measures the cost of failed transactions.

The Collateral Infrastructure and Market Practices Advisory Group (CIMPA) and the Canadian Depository for Securities (CDS), acting on behalf of the Canadian Fixed–Income Forum (CFIF), announced August 13 that the trial will begin September 8, 2026.

During the first phase, expected to run for at least 18 months, CDS will calculate both settlement failures and the corresponding fail fees. However, participants will not actually pay or receive those fees during this period. Instead, the system is intended to give market participants visibility into how the framework would operate if it were activated.

CDS will publish statistics on settlement failures and provide its participants with reports detailing failed trades and indicative invoices showing what the associated fees would have been. CIMPA has also updated its frequently asked questions covering the trial and the broader framework.

The initiative addresses a longstanding market–structure issue: trades in Government of Canada bonds and Treasury bills can fail to settle when the securities or cash required to complete a transaction are unavailable on the settlement date. Earlier CIMPA work described the framework as a mechanism intended to encourage timely settlement and reduce the operational risks associated with failed transactions.

The framework has been under development for several years. In 2025, CIMPA documents described plans for CDS infrastructure capable of tracking settlement failures, producing fail–rate information and generating hypothetical fee reports before any actual charges were introduced.

The eventual decision to activate actual fee payments will not automatically follow the initial trial. According to the Bank of Canada notice, CFIF will decide whether to move to a second stage involving payments or to activate the framework on a permanent basis after the initial 18–month period.

The trial therefore represents a transparency and testing phase rather than the immediate introduction of a financial penalty. Its results should give Canadian dealers, investors, custodians and other market participants a clearer picture of the frequency and potential cost of settlement failures before the industry decides whether actual fees should be collected.