Benchmark transition to start in January

The transition to a new financial benchmark, with the Canadian Overnight Repo Rate Average (CORRA) replacing the Canadian Dollar Offered Rate (CDOR), will begin in early January, an industry working group announced.

With the CDOR benchmark slated to disappear by mid-2024, the Canadian Alternative Reference Rate (CARR) working group set out the first steps in that transition today.

The CARR announced that quotations in the inter-dealer market will switch from CDOR to the CORRA, starting with certain derivatives (Canadian dollar interest rate swaps), on January 9, 2023.

Other inter-dealer derivatives, such as Canadian dollar swaptions and inter-dealer cross-currency swaps, will move to CORRA on March 27, 2023, it also said.

These initial changes only affect trading between Canadian banks and dealers, the working group said, noting that investors can continue to ask for CDOR-based derivatives after these dates.

“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,” it said in a release, adding the working group “also expects that this will shift the liquidity from BAX futures to CORRA futures.”

These changes to the inter-dealer market represent the first steps in CARR’s transition plan, which calls for market players to transition new derivatives to CORRA by mid-2023, ahead of the final cessation of CDOR in 2024.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.