financial instruments chart, derivaties

The Bank of Canada will take over production of the Canadian Overnight Repo Rate Average in June.

The central bank, which is taking over as administrator of the interest rate benchmark from Refinitiv Benchmark Services (UK) Ltd., will start providing the benchmark for free on its website on June 15.

CORRA is currently the reference rate for overnight index swaps, representing $1 trillion in notional exposure, the central bank noted.

“The Bank expects that, over time, CORRA will be adopted across a wider range of financial products and could become the dominant Canadian interest rate benchmark, particularly in derivatives markets,” it said.

In particular, the central bank noted that the Montreal Exchange “is currently working with the industry on a new CORRA futures product, which it expects to launch in 2020.”

“CORRA futures will help market participants to better manage their short-term Canadian interest rate risk,” the central bank said.

The bank also published its methodology for calculating CORRA, saying that it has “worked closely” with the Investment Industry Regulatory Organization of Canada and the industry to improve the methodology.

“A comprehensive governance structure that incorporates regular review of the calculation methodology will be put in place,” the central bank said, adding that its production of CORRA is intended to conform with the International Organization of Securities Commissions’ principles for financial benchmarks.

The other major interest rate benchmark, the Canadian Dollar Offered Rate, continues to be administered by Refinitiv.