Securities Repo Operations: Terms and conditions

December 18, 2023

Read the terms and conditions of Securities Repo Operations.

Operation details

• The Bank of Canada offers its holdings of the Government of Canada securities to eligible counterparties through a tender process for a term of one business day.
• Auction date, amount, bidding rate, and other information will be announced by the Bank of Canada on the securities repo operation webpage ahead of each auction.

Type of auction

• Multiple rate competitive auction for a fixed par amount of securities.

Eligible counterparties

• Canadian Primary Dealers in Government of Canada securities. The Bank of Canada has sole discretion to remove a Primary Dealer from the list of approved eligible counterparties for securities repo transactions, cap or limit a counterparty’s awards in a particular auction or otherwise cease to enter into securities repo transactions with such counterparty for any reason.

Frequency and term

• The Securities Repo Operation will be conducted every day the Bank of Canada is open.
• The term to maturity of each Securities Repo 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 are eligible for these transactions. The securities must not mature on the date of maturity of the Securities Repo Operation.
• Typically, the Bank of Canada will make up to 50 per cent of its holdings of eligible Government of Canada securities available to the market on a given day; however, the exact list and amounts of offered securities will be at the Bank’s discretion.

Tender process

• Tenders must be submitted in the Bank of Canada Auction System.
• The deadline for receiving bids is 10:15 (ET). 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.
• Tenders must specify a bid rate and an amount on a par-value basis. Each counterparty can submit a maximum of four bids per security.
• The minimum bid amount is $1 million, with minimum increments of $1 million.
• Each bid rate must be submitted on a yield basis, up to two decimal places.
• Bidding is subject to the following limits and restrictions:

1. 1. Each operation will have a maximum bid rate determined by the Bank at its sole discretion. Tendered repo rates must be equal to or less than this maximum bid rate. Maximum rate will be the same for all securities and will be announced prior to each auction.
   2. The maximum total bidding amount across all securities is $5,000 million. Eligible participants may submit multiple bids for one or several securities as long as the total amount is equal to or below the maximum amount.

• Primary Dealers may not bid directly or indirectly on behalf of, or in concert with, any other Primary Dealers or any other entity.

Allocation process

• For each security offered by the Bank tenders with the lowest repo rate will be accepted and allocated first. Tenders with successively higher bidding rates 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 highest accepted bid rate is the cut-off rate. If the sum of tender amounts at the cut-off rate 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 repo trade using the allocated par amount and repo rate submitted by the bidder.

Timing of results

• The operation results will be made available on the Banks website shortly after the operation.

Cash flow payments

• All coupon payments received by the eligible counterparty on the securities during the term of the transaction will be kept by the holder of the securities. The final settlement amount will be adjusted, as required, to account for these receipts in accordance with the Bank of Canada's Master Repurchase Agreement.
• Coupon payments on the securities that failed to settle on the maturity date will be returned to the Bank in accordance to the Settlement Fails section below.

Interest calculation

• Interest on the funds will be calculated on an actual/365-day basis.

Counterparty settlement instructions

• Cash shall be delivered to the Bank of Canada by 16:00 (ET) through CDSX on the settlement day of the operation, on a delivery of securities versus payment of funds basis. Cash amounts to be delivered shall be confirmed with and calculated by the Bank of Canada after the auction and prior to delivery. A confirmation of the transaction will be provided by the Bank of Canada. Securities shall be returned to the Bank of Canada by 16:00 (ET) through CDSX on the maturity day of the repo trade, on a delivery of securities versus payment of funds basis.
• The Bank of Canada’s CDS settlement customer unit identifier (CUID) is BOCB.

Settlement fails

• If a Primary Dealer fails to return securities on the maturity date, the Bank of Canada may allow the Primary Dealer to deliver the failed securities the next business day for the same cash amount that would have otherwise been payable by the Bank if the fail had not occurred. The Bank expects the Primary Dealer to settle the failed amount on the next business day by accessing this facility or through its market activities.
• Primary Dealers that do not remedy a settlement fail by the end of the following business day may be subject to sanctions.
• If the fail occurs over the coupon payment date the Bank will separately claim any outstanding entitlements and coupon payments that are owed by a counterparty due to the fail.
• Settlement instructions for repayment of the coupon payment to the Bank if the fail occurs over the coupon payment date:

Bank Institution Code: BCANCAW2
Reference: SRO Coupon Repayment
Account: 177-5

Legal arrangements

• Eligible counterparties must have made the appropriate legal arrangements with the Bank of Canada.
• All tenders submitted by eligible counterparties for the Bank of Canada Securities Repo Operations shall be subject to these Terms.
• The Bank of Canada reserves the right to change the terms of its Securities Repo Operations 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 bidding deadline.
• The Bank of Canada reserves the right to accept or reject any or all bids, 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 errors in tenders received or for delays in the transmission of tenders.
• The Bank of Canada may, in addition to and without prejudice to any rights under the Bank of Canada’s Master Repurchase Agreement, sanction a Primary Dealer if the Bank of Canada is of the view that the Primary Dealer breached any of the terms, including, failing to return securities on the maturity date. The sanctions that the Bank of Canada may impose include, without limitation, suspending the Primary Dealer from participating in one or more future auctions and changing, on a temporary basis, the bidding limit applicable to the Dealer.

General conditions

• Consistent with the Terms of Participation in Auctions for Government Securities Distributors, all eligible participants shall comply with IIROC Rule 2800, the Code of Conduct for IIROC-Regulated Firms Trading in Wholesale Domestic Debt Markets.