close up view of new 100 Canadian dollar banknotes

An industry group that oversees Canada’s interest rate benchmarks is launching a consultation on a methodology for constructing rates to be used in financial products.

The Canadian Alternative Reference Rate (CARR) working group, which is co-chaired by the Bank of Canada, published a consultation paper that proposed a methodology for calculating a Canadian Overnight Repo Rate Average (CORRA) in arrears.

The proposed methodology would be used to create three daily compounded average rates — for one, two and three-month periods — to facilitate the use of CORRA in financial products.

It also proposed a daily CORRA index to enable the calculation of compounded average rates over custom periods.

“Similar indexes and averages have been developed in other jurisdictions, since having a transparent calculation methodology that firms can rely upon can help support market liquidity by improving standardization,” the bank said in a release.

Along with the methodologies, the paper also proposed draft fallback language for floating rate notes that are geared to the Canadian Dealer Offered Rate (CDOR).

The working group said that it’s seeking feedback from both issuers and investors that have financial instruments referencing CORRA or CDOR.

The deadline for responses is Dec. 22.