- BMO, CIBC, RBC, Scotiabank and TD participated in the first live transactions
- Marks the first domestic tri-party repo capability within the Canadian market
- Represents an optimized financing solution supporting the cessation of Banker’s Acceptances
The Canadian Collateral Management Service (CCMS) has gone live with Canada’s top 5 dealers — BMO, CIBC, RBC, Scotiabank and TD — conducting the inaugural trades. Developed by TMX Group and Clearstream, CCMS 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 minimize exposure risk.
CCMS will help market participants solve legacy technical challenges and operational limitations by automating the end-to-end lifecycle of a repo trade, optimizing collateral within the market and truly democratizing the repo market. TMX Group operates the Toronto Stock Exchange and key Canadian post-trade infrastructure including the Canadian Depository for Securities (CDS). Clearstream Banking S.A. is the international central securities depository of Deutsche Börse Group.
“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,” said Marton Szigeti, head of Collateral, Lending & Liquidity Solutions at Clearstream, in a statement.
The onboarding and go-live were completed over an intensive 3-month period, with the platform providing a stable, efficient and transparent way of using and reusing collateral as well as DvP and settlement certainty and straight-through processing, he added, speaking with Finadium News & Opinion.
“[The Canadian central securities depository] leverage our core triparty platform to facilitate triparty transactions in the Canadian market as if they were clients of Clearstream Banking Luxembourg. They get to use the full suite of products [and] algorithms as if they were a core client,” Szigeti explained.
BAs wind down
Tri-party repos provide a viable investment alternative for market participants seeking liquidity and to manage risk exposure. This will be particularly important after the disappearance of Banker’s Acceptances (BAs) following the cessation of the Canadian Dollar Offer Rate (CDOR) on June 28, 2024.
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.
“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,” said Steve Everett, head of Post Trade Innovation at TMX Group, in a statement.
Speaking to Finadium News & Opinion, he noted that ultimately, this is going to spur behavioral change in Canadian markets because of the substantial efficiency upgrade compared to how traditional bilateral and triparty has worked for domestic participants, representing a “step change from lagging international peers: “We are inching ahead, certainly in the next few months. And by the end of the year, it’s going to be a real competitor.”
Harri Vikstedt, senior policy director at the Bank of Canada and co-chair of the Canadian Infrastructure and Market Practices Advisory Group (CIMPA), said in a statement: “The introduction of CCMS will promote a well-functioning money market and modernize 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 of Financial Resource Management at BMO Capital Markets and CIMPA co-chair, said in a statement: “The development of a tri-party repo service represents an advancement in the evolution of liquidity management in Canada, leveraging technology to optimize efficiency, risk management and collateral eligibility in the Canadian market.”