OSTTRA all set for cessation of Canada’s CDOR next month

Rick Steves

OSTTRA is readying the transition to the new Canadian Overnight Repo Rate Average (CORRA) reference rate next month with MarkitWire and triReduce.

Bank of Canada

OSTTRA has announced that it is taking proactive steps to facilitate a smooth transition for market participants to the new Canadian Overnight Repo Rate Average (CORRA) reference rate.

The proactive steps include a series of trials in which OSTTRA’s MarkitWire platform provides its worth, having processed a staggering 200,000 messages during dress rehearsals conducted in collaboration with major clearinghouses such as LCH and CME, specifically focusing on the Canadian Dollar (CAD) market.

The global post-trade solutions provider’s trials involved 40 customers and demonstrated its readiness for the cessation of the Canadian Dollar Offered Rate (CDOR) next month.

OSTTRA offers MarkitWire and triReduce ahead of CORRA

OSTTRA’s triReduce service also achieved a major feat in the first quarter, having compressed CAD trades by over 70%, surpassing previous records. The platform simplifies portfolios by reducing notional exposures and line items for both cleared and non-cleared OTC derivative trades.

triReduce is all about multilateral compression across a wide range of derivative products, including interest rate swaps, cross-currency swaps, credit default swaps, FX forwards, and commodity swaps. It empowers firms to mitigate risk and manage escalating balance sheet costs amidst growing resource constraints.

Multilateral compression has become a crucial feature in post-trade as regulators are driving market participants to streamline their gross notional exposure.

Erik Petri, Head of Optimisation at OSTTRA, commented: “As market participants continue to gear up for the end of CDOR, multilateral compression not only mitigates risk but also addresses growing resource constraints, aligning perfectly with the industry’s need for efficiency amid growing cost pressures. Our seamless integration with major central counterparties (CCPs) and infrastructure providers globally ensures that our clients can effortlessly participate in compression cycles with counterparts across the world.”

OSTTRA launched FX PvP settlement powered by Baton

Earlier this month, OSTTRA launched a FX PvP (payment versus payment) settlement service powered by Baton Systems, which addresses the escalating Herstatt risk as identified by major financial institutions like the BIS, the ECB, and the GFMA.

The service aims to enhance the security and efficiency of FX settlements, a concern heightened by the transition to T+1 settlement for securities in North America starting May 28, 2024.

Leveraging Baton Systems’ advanced distributed ledger technology, OSTTRA’s FX PvP settlement service is designed to not only mitigate settlement risk but also optimize intraday funding, liquidity, and credit risk.

This collaboration marks a significant step forward in OSTTRA’s strategy to enhance the structure of OTC markets. The firm has plans to eventually include settle-to-market functionality, significantly reducing derivative counterparty exposures, therefore reducing the regulatory capital required under SA-CCR (Standardised Approach to Counterparty Credit Risk).

Baton Systems supports the settlement of billions of dollars daily, with its systems having facilitated settlements exceeding $8.1 trillion to date.

The initiative comes in response to warnings from global financial institutions about the risks associated with FX settlement outside of traditional PvP platforms. The service specifically targets transactions not currently covered by CLS, aiming to include non-CLS eligible currencies and providing greater flexibility for intraday settlements.

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