CORRA Advisory Group: Terms of Reference

Effective: August 21, 2020

Background

As per the Bank of Canada methodology for calculating CORRA, the CORRA Advisory Group (CAG) has been established to advise the Bank’s CORRA Oversight Committee on any potential adjustments to the CORRA methodology, stemming from changes in repo market functioning and from any emerging methodology issues, as well as on any changes undertaken as part of regular methodology reviews.

CAG has been initially established as a subgroup of the Canadian Alternative Reference Rate working group (CARR). If CARR ceases to exist in the future the CAG will continue as a stand-alone group.

Key objectives

  • Assess if CORRA continues to represent the underlying overnight general collateral funding rate for Government of Canada securities as collateral.
  • Provide insight on the structure and functioning of the Canadian repo market as it relates to the calculation of CORRA.
  • Raise awareness of emerging methodological issues.
  • Propose and/or provide feedback on any changes to the CORRA calculation methodology including the type of repo transactions (term and collateral) included in CORRA and publication process.
  • Provide feedback on and support industry and public consultations on proposed changes to the CORRA methodology.
  • Review CORRA documentation and reports for accuracy and clarity of communication.
  • Contribute to the mandatory review of CORRA methodology every 5 years, as required by the CORRA sunset provision.

Membership

CAG’s membership will be composed of a wide range of applicable stakeholders, including buy- and sell-side firms, debt issuers, exchanges or clearing houses, and IIROC.

Members are expected to have a strong understanding of at least one of the following: (1) CAD repo market functioning; (2) end-user trading or hedging implications for the various products referencing CORRA; and, (3) risk management and collateral implications affecting CORRA.

Membership composition will balance expertise in these various aspects of the benchmark’s usage.

Members will be appointed by CARR for a minimum term of 3 years and membership will periodically rotate between various stakeholders.

CAG’s chair will be appointed by the existing CAG members and, upon CARR’s approval, will serve a minimum term of 3 years, with the possibility of renewal. The CAG chair will be an observer member of CARR. If the CAG chair is already a member of CARR, they will retain this membership.

Secretariat support will be provided by the Bank of Canada.

Member responsibilities

Members are expected to dedicate the necessary time and resources to CAG’s work. They should actively attend and participate in meetings, including presenting their analysis of CORRA and related markets.

Any CAG member with approval of the chair may:

  • propose additional analysis of the underlying repo market, including further analysis by the Bank of Canada using data not available to CAG members such as MTRS2 data;
  • propose changes to the CORRA calculation and publication methodology.

Any recommendations from CAG to the Bank’s CORRA Oversight Committee will be done on a majority support basis. Recommendations that could lead to material changes to CORRA must be also supported by the CAG chair and by CARR.

All CAG members are expected to:

  • help execute public or targeted consultations and to promote trust in CORRA as a robust, reliable and representative risk-free reference rate in Canada;
  • be aware of their obligations under the Competition Act and avoid the disclosure of any competitively sensitive information;
  • inform chair of any Competition Act concerns of which they become aware and which arise from CAG’s discussions.

Meetings

CAG will meet semi-annually. Additional meetings may be called by the chair as required.

Transparency

CAG’s terms of reference and its list of members will be published on the group's website, along with documents pertaining to meetings, including agendas and minutes.

Review

These terms of reference may be amended from time to time and will be reviewed as a part of the mandatory review of the CORRA methodology undertaken every five years.