April 14, 2007 Since 1997 when the Bank of Canada last published a review of the Canadian overnight market, several important changes have affected the market's structure and dynamics. Reid provides a current overview of the market, examining the financial instruments, market transparency and flows, and the collateralized overnight rate as it has evolved since the introduction of the Large Value Transfer System and the fixed announcement dates. Other significant influences include changes in market practices regarding risk management, the rise of securities lending, the increased demand for collateral, and the Bank of Canada's measures to reinforce the target for the overnight rate.
Differences in market structures may affect the manner in which fundamental information is incorporated into prices. High levels of quote and trade transparency plus substantial quoting obligations in European government securities markets ensure that prices are informationally efficient.