In an effort to enhance liquidity in key short-term interest rate derivatives for the Canadian market, the Bourse de Montréal Inc. (MX) is launching a new market-maker program.
On Wednesday, the derivatives exchange issued a request for proposal (RFP) seeking investment firms to participate in a new market-maker program for long-end expiries (two to five year) for three-month CORRA futures, which have replaced Bankers’ Acceptances (BAX) as the flagship interest rate derivatives in Canada, in the wake of efforts to reform financial benchmarks.
“While the front end of the curve has seen impressive growth, the development of the long-end expiries is essential for completing the CORRA futures curve and supporting the broader CORRA ecosystem,” the exchange said in its’ RFP, adding that these instruments provide traders with “critical interest rate management tools for framing expectations over the medium and long term.”
Now, in an effort to boost liquidity in these instruments, the MX is launching a program “aimed at accelerating growth in the long-end trading, providing tighter and deeper market liquidity, and enhancing pricing transparency for the entire curve.”
Firms will have flexibility in how they achieve these goals, the exchange said.
“The Bourse is seeking innovative proposals for market-making, liquidity provision, and trading activities for the [instruments],” it said.
And, unlike its existing market-making program, the exchange is looking for proposals that include “specific, custom programs to boost liquidity,” which may include outright market making, dedicated liquidity provision for specific strategies and plans for promoting the long-end expiries and attracting new traders.
Firms that want the job are asked to submit a proposal that details their “ability to maintain robust liquidity throughout the day, effectively market the product to end users and attract new business.”
The Bourse said that up to three firms will be selected to participate in the new program, which will be launched on March 2.
The deadline for applications is Jan. 30.