The Bank of Canada has announced that it will join the Canadian Collateral Management Service (CCMS) tri-party platform for its domestic repo operations by early 2027. This reaffirms the Bank’s commitment to resilient and well-functioning repo markets. In addition, the Bank intends to join the Canadian Derivatives Clearing Corporation (CDCC) to centrally clear its repo operations, following the completion of TMX’s investments to modernise its central clearing services to facilitate broader adoption by a wider range of participants.
The CCMS will enable buy- and sell-side market participants in Canada to manage risks and liquidity more efficiently, benefit from a greater variety of funding sources, enhance collateral mobility and outsource settlement and administrative functions. Overall, these benefits will increase the robustness and efficiency of Canada’s repo market.
Conducting the Bank’s repo operations within the CCMS tri-party ecosystem will support more efficient and timely settlement for central bank operations, assist in developing the term repo market, and encourage the market adoption of the general collateral repo market backed by Government of Canada securities.
CDCC cleared repo trades minimize counterparty credit risk by guaranteeing settlement and increases balance sheet capacity of intermediating dealers in securities financing markets through netting of offsetting repo transactions.
The Bank of Canada stated in a press release that its plan to join CDCC aligns with the global trend towards increased use of central clearing. As the Bank transitions to clearing its main repo operations through CDCC, the netting benefits will reduce frictions in its monetary policy transmission and increase the efficiency and effectiveness of those operations.
