The Investment Industry Association of Canada (IIAC) says that it has decided to start including trades cleared through a new fixed-income central counterparty in the calculation of the benchmark overnight repo rates, and it is seeking industry feedback on the move.

In a notice published on Tuesday, the IIAC proposes that trades cleared through the Canadian Derivatives Clearing Corporation’s (CDCC) new fixed-income central counterparty (CCP) system should be included in Canadian Overnight Repo Rate (CORRA).

The CORRA measures the average cost of overnight collateralized funding, and is set as the volume weighted average rate of overnight repo transactions conducted through designated inter-dealer brokers between 6:00 am and 4:00 pm and as reported to the Bank of Canada. However, some of those trades are now being cleared through a new CCP launched by the CDCC in February.

Initially, a very limited number of Government of Canada securities were eligible for clearing through the CCP. But, the notice says it has steadily expanded its list of securities eligible for clearing, with virtually all federal government bonds now accepted.

“This has also had a corresponding effect on the volume of GC repo cleared through the CCP. Further, additional participants have since indicated interest in centrally clearing through the CCP and it is envisaged that participation will gradually increase,” it says.

So, given the growth in the volume of repo trades cleared through the CCP, the IIAC has been reviewing the appropriateness of expanding the CORRA to include this activity. It reports that a majority of its repo committee members believe that all Government of Canada repos traded on the inter-dealer broker screens should be included in the CORRA, including transactions destined for clearing through the CCP, so that it captures as broad a data set as possible.

Therefore, the IIAC has decided provisionally to include all CDCC cleared trades executed through inter-dealer broker screens in the CORRA calculation starting on Oct. 29. However, it is seeking feedback from the industry on this decision, given the CORRA’s significance to the broader market, particularly the overnight index swaps market. Comments are sought by Oct. 15.