(This notice, originally published December 9, was updated on December 15.)
The Canadian Alternative Reference Rate working group (CARR) has been laying the groundwork to ensure a smooth transition of financial products referencing the Canadian Dollar Offered Rate (CDOR). This work began in earnest following the announcement of CDOR’s cessation after June 2024. CARR released its Transition Roadmap and Milestones in May that includes a number of “CORRA-first” initiatives. Today’s announcement highlights the CORRA-first dates related to the Canadian derivatives market, the first of which will be in one month. These initiatives see the inter-dealer quotations banks/dealers post in the inter-dealer market switch from CDOR to the Canadian Overnight Repo Rate Average (CORRA) on two dates:
- Inter-dealer linear derivatives (i.e., Canadian dollar interest rate swaps) will move from CDOR to CORRA on January 9, 2023, and
- Both inter-dealer non-linear derivatives (i.e., Canadian dollar swaptions) and inter-dealer cross-currency swaps will move from CDOR to CORRA on March 27, 2023.
Update: CORRA-first affects trading between all banks/dealers who transact in Canadian dollar interest-rate derivatives in the inter-dealer broker market. Clients of those banks/dealers are not directly affected by CORRA-first and can continue to ask for CDOR-based derivatives. However, as inter-dealer liquidity migrates from CDOR- to CORRA-based derivatives, liquidity in CORRA swaps will increase and volumes of CDOR swaps will decrease. CARR also expects that this will shift the liquidity from BAX futures to CORRA futures.
CARR’s CORRA-first initiatives follows the announcement by CDOR’s administrator, Refinitiv benchmark Services (UK) Limited, that it would discontinue CDOR after June 28, 2024. The Office of the Superintendent of Financial Institutions has also announced that it expects federally regulated financial institutions and pension plans will adhere to the two-staged transition plan provided by CARR. This plan specifically requires market participants to transition their new derivative contracts to reference CORRA after the end of June 2023 (except for derivative activity relating to the hedging of loans, and certain risk-reducing trades).
Canada established CARR, a working group sponsored by the Canadian Fixed-Income Forum, to coordinate Canadian interest rate benchmark reform. CARR’s mission is to ensure Canada’s interest rate benchmark regime is robust, resilient and effective in the years ahead. Over the coming transition period, CARR will support the transition from CDOR to CORRA as a key financial benchmark, including working to potentially create an IOSCO-compliant Term CORRA rate.
Visit CARR’s webpage for up-to-date information on the transition, including all of CARR’s key documents, and to sign-up to receive email updates from CARR.
Financial Markets Department
Bank of Canada
Managing Director and Vice Chair
CIBC Capital Markets
Bank of Canada