New collateral basket aims to strengthen Canada’s repo market

A new standardized Government of Canada collateral basket is now being used in repo trading, a move aimed at improving efficiency and liquidity in the country’s financing markets.

The Collateral Infrastructure and Market Practices Advisory Group, TMX Group and Clearstream announced Wednesday that trading using the new Government of Canada General Collateral basket has successfully begun on the Canadian Collateral Management Service platform.

The initiative is designed to improve the movement of collateral in Canada’s repo market by allowing for fully automated collateral management and unlimited real-time substitutions.

Officials say the standardized basket is expected to make liquidity management more efficient while encouraging broader use of the Canadian Collateral Management Service, Canada’s first tri-party collateral management service offered by TMX Group and Clearstream.

The groups say the combination of the tri-party platform and standardized collateral baskets will help improve the resilience and overall functioning of Canada’s repo market.

The launch marks the first phase of a broader rollout.

Additional standardized collateral baskets are expected to be introduced in the coming months, covering provincial securities, Canada Mortgage Bonds, National Housing Association mortgage-backed securities, public-sector entities and corporate securities.

The Collateral Infrastructure and Market Practices Advisory Group is an industry-wide working group established to promote greater efficiency and coordination in Canada’s securities and financing markets.

The initiative is being developed as part of efforts to reduce market fragmentation and improve the operational efficiency of Canada’s financial markets.