The Ontario Securities Commission and the Autorité des marchés financiers (the “Regulators”) recently received an application (the “Application”) from CanDeal Benchmark Administration Services Inc. (“CBAS”) to have Term CORRA designated as a designated interest rate benchmark and CBAS designated as its designated benchmark administrator. The Regulators are accepting public comments on the Application until August 8, 2023.

What is Term CORRA?

On June 28, 2024, the Canadian Dollar Offered Rate (“CDOR”), a designated interest rate benchmark, will cease to be published. It is anticipated that market participants will use the Canadian Overnight Repo Rate Average (“CORRA”) as the alternative reference rate for most instruments that currently reference CDOR. CORRA is an existing interest rate benchmark, administered by the Bank of Canada.

By contrast, Term CORRA is a new interest rate benchmark, administered by CBAS, that is intended to replace CDOR for certain instruments or, when appropriate, for related derivatives. Term CORRA will be a forward-looking measurement of CORRA for 1- and 3-month tenors, based on market-implied expectations from CORRA derivatives markets. Its use will be limited through licensing agreements to trade finance, loans and derivatives associated with loans. As such, it is expected that Term CORRA will be important for the successful transition of the Canadian loan and trade finance market from CDOR.

The Designation Process

As we discussed in a previous post, under Multilateral Instrument 25-102 Designated Benchmarks and Benchmark Administrators (“MI 25-102”), regulators may designate and regulate financial benchmarks, their administrators, contributors and certain users. CBAS has applied to the Regulators on this basis and intends to launch Term CORRA for use by market participants in September 2023. It is worth noting that since the regime under MI 25-102 is one of designation, rather than registration or licensing, Term CORRA and CBAS need not be designated prior to launch.

While the Regulators believe that the Application should be accepted, they welcome public comments until August 8, 2023.

[View source.]