September 24, 2024
Read the terms and conditions of the Securities-Lending Program.
Operation details
- The Bank of Canada offers its holdings of the Government of Canada securities to eligible counterparties through a tender process.
- Auction date, amount, minimum bid fee, and other information will be announced by the Bank of Canada ahead of each auction.
Type of auction
- Multiple rate competitive auction for a fixed par amount of securities.
Eligible counterparties
- Primary Dealers in Government of Canada securities shall be eligible counterparties for purposes of the Bank of Canada’s Securities Lending Program. The Bank of Canada has sole discretion to remove a Primary Dealer from the list of approved eligible counterparties for securities lending transactions, cap or limit a counterparty’s awards in a particular auction or otherwise cease to enter into securities lending transactions with such counterparty for any reason.
Frequency and Term
- The securities lending operation will be conducted every day the Bank of Canada is open.
- The term of each securities lending operation is one business day.
Securities type and operation size
- Directly-issued Government of Canada marketable securities denominated in Canadian dollars except Real Return Bonds will be made available for these transactions. The securities lending auction will exclude ISINs that have a maturity date within one business day of the auction. Exceptions to this will be at the Bank of Canada’s discretion.
- The Bank of Canada will generally make up to 50 percent of its holdings of eligible Government of Canada securities available to the market on a given day. However, the Bank of Canada may increase this up to 75 percent at its discretion. The exact list and amounts of offered securities will be at the Bank of Canada’s discretion.
Tender process
- Tenders must be submitted in the Bank of Canada Auction System.
- The deadline for receiving bids is 10:15am (Ottawa time). The Call for Tenders will be released 15 minutes before the deadline. The Bank of Canada reserves the right to conduct these transactions earlier or later in the day, with an approximate 15-minute tender submission deadline to be set by the Bank of Canada.
- Each counterparty can submit a maximum of four tenders per security. Tenders for each security must specify a bid securities lending fee and an amount on a par-value basis.
- The minimum bid amount is $1 million, with minimum increments of $1 million.
- Each bid fee shall be stated in number of basis points with no decimal places.
- Bidding is subject to the following limits and restrictions:
- Each operation will have a minimum bid securities lending fee determined by the Bank of Canada at its sole discretion. Tendered bid rates must be equal to or greater than this minimum bid fee.
- The maximum total bidding amount per eligible counterparty across all securities is $5 billion. Eligible counterparties may submit multiple bids for one or several securities as long as the total amount is equal to or below the maximum amount.
- Eligible counterparties may not bid directly or indirectly on behalf of, or in concert with, any other eligible counterparties or any other entity.
Allocation process
- For each security offered by the Bank of Canada, tenders with the highest bid fee will be accepted and allocated first. Tenders with successively lower bids will continue to be accepted until the total allocated amount of a security reaches the amount on offer and the auction is completely allocated. The lowest accepted bid is the cut-off. If the sum of tender amounts at the cut-off exceeds the amount available to allocate, these tenders will be allocated on a pro-rated basis and rounded to the nearest $1 million.
- Each allocated bid will be booked as a securities lending transaction using the allocated par amount and bid fee submitted by the bidder.
Timing of results
- The auction results will be made available on the Bank of Canada’s website shortly after the auction.
Eligible collateral
- The eligible collateral for the Bank of Canada’s Securities-Lending Program are Canadian dollar-denominated marketable securities that are directly-issued by the Government of Canada or fixed-rate Canada Mortgage Bonds. ISINs that have a maturity date within seven calendar days of the operation will not be eligible collateral.
- All collateral delivered must be submitted free and clear of all liens, charges, claims, encumbrances, hypothecs, security interests or other restrictions of any kind, and an eligible counterparty, in delivering securities as collateral, is deemed to warrant and represent that all securities delivered by it are free and clear.
Notification of collateral to be used
- Within 30 minutes of allocating the auction, counterparties must enter the securities that will be used as collateral through the dealer interface in the Bank of Canada’s Collateral Management System (accessed via BoC connect). The Bank of Canada’s Collateral Management System will be used to confirm eligibility, price the collateral and book the transaction. A confirmation of the transaction will be provided by the Bank of Canada.
- The number of securities to be used as collateral is limited to a maximum of 20 ISINs per borrowed security when using the dealer interface. However, at the Bank of Canada’s discretion, the Bank of Canada may enter the collateral on the eligible counterparty’s behalf and in such cases when the dealer interface is not used, the number of securities to be used is limited to a maximum of 5 ISINs per borrowed security.
Margin Requirements
- The collateral margin requirements for the Bank of Canada’s Securities Lending Program are the same as those for the Bank of Canada’s Standing Liquidity Facility (as may be amended from time to time).
Lending fee
- The Bank of Canada will charge a lending fee on each transaction, which will be calculated by applying the rate of winning bids to the market value of the security borrowed on an actual/365-day basis. The lending fee will be made available on the day of the auction via the securities lending fee report, and the lending fees shall be payable via Lynx by 3:30 pm (Ottawa time), on the termination date of the transaction (payable due date on the fee report).
- Below are the instructions for payment of lending fees. The Bank of Canada’s SWIFT BIC is BCANCAW2. The payment instruction should be a SWIFT type MT205 or PACS.009 and should include the following information:
Required information for MT205
| Field 21: | BOC SL FEE |
|---|---|
| Field 32A: | Value Date, Currency and Amount, as indicated in the SL Fee Report |
| Field 52D: | Ordering Institution (PD name or CUID) |
| Field 58A: | Beneficiary Institution BIC = BCANCAW2 |
| 177-5 | |
| Field 72: | /BNF/BOC SL FEE YYYY-MM-DD |
Required information for PACS.009
| End to End ID: | BOC SL FEE |
|---|---|
| Value date: | As indicated on SL Fee Report |
| Payment Amount ($): | As indicated on SL Fee Report |
| Creditor: | Beneficiary Institution BIC = BCANCAW2 |
| Creditor Account: | 177-5 |
| Debtor: | PD name or CUID |
| Remittance information: | BOC SL FEE YYYY-MM-DD |
Counterparty settlement instructions
- Collateral for the securities loan must be delivered to the Bank of Canada by the start of CDS payment exchange on the day of the auction. If the full amount of collateral is not posted to and settled with CDS by such time, the transaction will be cancelled.
- A unique CDSX pledge will be associated with each ‘Securities Lending Confirmation’ report. The eligible counterparty will be responsible for entering and modifying the pledge transaction. Neither the loaned nor the collateral securities will be netted from one operation to the next.
- The delivery of the loaned securities and collateral securities shall be effected through the type S pledge function of CDSX (or equivalent in any successor service to CDSX), involving the book entry transfer from the CDSX securities account designated by the eligible counterparty to the Bank of Canada’s CDSX securities account. Eligible counterparties shall observe all applicable CDS rules, procedures and user guides for CDSX or any successor service to CDSX.
Settlement fails
- If an eligible counterparty expects it will fail to return a portion of the loaned securities on the termination date, the eligible counterparty shall inform the Bank of Canada of the expected partial settlement within 15 minutes following the start of CDS payment exchange in order to settle the partial amount The start of CDS payment exchange is normally 4:00pm (Ottawa time), except in the case of extensions to the start of CDS payment exchange at the discretion of CDS.
- The Bank of Canada shall use its best efforts to settle the partial amount within 30 minutes following the start of payment exchange (or such later time as may be determined by the Bank of Canada at its sole discretion) and the remaining amount may (at the Bank of Canada’s sole discretion) be rolled over to the next business day pursuant to the terms set forth below.
- Should partial settlement not occur or if the partial settlement is not fully processed within 30 minutes following the start of payment exchange (or such later time as may be determined by the Bank of Canada at its sole discretion), the transaction will be deemed to have fully failed and may (at the Bank of Canada’s sole discretion) be rolled over to the next business day pursuant to the terms set forth below.
- If an eligible counterparty does not inform the Bank of Canada of an expected partial settlement, the transaction will be deemed to have fully failed and may (at the Bank of Canada’s sole discretion) be rolled over to the next business day pursuant to the terms set forth below.
- If an eligible counterparty fails to return securities on the termination date, the Bank of Canada may allow the eligible counterparty to deliver the failed securities the next business day. In such case, the Bank of Canada will impose a rollover fee which shall be the higher of:
- The securities lending fee for the initial transaction
- The highest securities lending fee bid on that ISIN in that day’s SLP operation
- The Bank of Canada may, at its sole discretion, impose a rollover surcharge in addition to the rollover fee.
- Collateral that has been posted to the Bank of Canada, which has a maturity date within seven calendar days of the rollover date shall not be eligible and shall be substituted by the eligible counterparty as required by the Bank of Canada. When collateral is substituted for this reason, the transaction will be rebooked as a new transaction, with relevant fees applied. There will be no other substitutions of collateral, including for full or partial fails.
- In the event of a full or partial fail, the Bank of Canada will not return excess collateral.
- The Bank of Canada expects the eligible counterparty to settle the failed amount on the next business day by accessing this facility or through its market activities.
- The Bank of Canada reserves the right to apply sanctions at any time if eligible counterparties do not remedy settlement fails.
Cash flow payments
- Coupon and maturity payments on securities loaned out to the eligible counterparty, will be returned to the Bank of Canada via CDSX on the payment date prior to the start of CDSX payment exchange.
- Coupons on collateral securities held by the Bank of Canada, will be paid to the eligible counterparty via CDSX on the payment date prior to the start of CDSX payment exchange.
Legal arrangements
- Eligible counterparties must have made the appropriate legal arrangements with the Bank of Canada, including executing legal documentation as required by the Bank of Canada.
- All tenders submitted by eligible counterparties for the Bank of Canada Securities Lending Program shall be subject to these Terms and Conditions.
- The Bank of Canada reserves the right to change the terms of its Securities Lending Program at any time by posting a revised version of these Terms and Conditions.
- Each tender shall be unconditional and shall be received by the Bank of Canada, not later than the time, and on the auction day, specified in the Call for Tenders.
- The Bank of Canada reserves the right to accept or reject any or all tenders, in whole or in part, including without limitation, the right to accept less than the total amount specified ahead of the auction. The Bank of Canada also reserves the right to deny access to the tender process at its own discretion.
- The Bank of Canada shall not bear any liability whatsoever for any loss incurred by an eligible counterparty or any other person arising out of any errors in tenders received, delays in the transmission of tenders, technological failures or interruptions, or events or circumstances beyond the Bank of Canada’s control.
- The Bank of Canada may, in addition to and without prejudice to any rights under the Bank of Canada’s Master Securities Loan Agreement, sanction an eligible counterparty if the Bank of Canada is of the view that the eligible counterparty breached any of the terms, including, failing to return securities on the termination date. The sanctions that the Bank of Canada may impose include, without limitation, suspending the eligible counterparty from participating in one or more future auctions and changing, on a temporary basis, the bidding limit applicable to the eligible counterparty.
General conditions
- Consistent with the Terms of Participation in Auctions for Government Securities Distributors, all eligible counterparties shall comply with CIRO Rule 7100, the Code of Conduct for Corporation Dealer Member Firms Trading in Wholesale Domestic Debt Markets.