Interpretation and Application

Definitions

1 The definitions in this section apply in this by-law, unless the context otherwise requires.

additional settlement obligation

additional settlement obligation or ASO means, for each participant, that participant’s obligation, pursuant to section 58, to advance funds, in the amount calculated in accordance with sections 26 to 29, to ensure settlement in the event that another participant is in default as defined in section 56. (obligation supplémentaire de règlement ou OSR)

approved payment message

approved payment message means a payment message that has passed all applicable risk control tests set out in this by-law. (message de paiement approuvé)

bilateral credit limit

bilateral credit limit means the aggregate value of tranche 2 payment messages that one participant has indicated, at any time during the LVTS cycle, it is willing to accept from another participant in excess of the aggregate value of tranche 2 payment messages sent to that other participant by the first participant. (limite de crédit bilatérale)

branch of account

branch of account means, in relation to each payment message, the branch or office of a financial institution where the amount of the payment message is to be made available to the payee. (succursale du compte)

business day

business day means a day designated in the rules that LVTS is operational. (jour ouvrable)

collateral

collateral means any form of security that is designated by the Bank of Canada, in written communications with the participants, to be acceptable as security for advances of funds by the Bank of Canada and includes securities of a type designated by the Bank of Canada as acceptable as collateral for advances and funds on deposit with the Bank of Canada. (garantie)

discretionary advance

discretionary advance means an advance made by the Bank of Canada to a participant, other than an advance that the Bank of Canada is obligated to provide pursuant to sections 57, 58 and 60. (avance discrétionnaire)

General Manager

General Manager[Repealed, SOR/2010-43, s. 1]

Large Value Transfer System

Large Value Transfer System or LVTS means the funds transfer system owned and operated by the Association by which participants may electronically exchange payment messages between themselves and in which the receipt by participants of such payment messages creates payment obligations that are netted on a multilateral net basis, settled on a multilateral net basis directly on the books of the Bank of Canada and supported by collateral pledged to the Bank of Canada as security for any advances to enable participants to settle their payment obligations arising from the system. (système de transfert de paiements de grande valeur ou STPGV)

LVTS cycle

LVTS cycle means the period of time beginning with the initialization of the LVTS on a business day and ending with the next settlement at the Bank of Canada of the multilateral net positions of all participants. (cycle du STPGV)

maximum ASO

maximum ASO means, for each participant, the largest amount, calculated in accordance with section 28, that the participant could be required to pay in any single LVTS cycle by reason of its additional settlement obligations. (OSR maximale)

multilateral net position

multilateral net position means, for each participant, at any time during an LVTS cycle, the value obtained by subtracting

• (a) the sum of all approved payment messages sent by the participant to all other participants during that LVTS cycle

from

• (b) the sum of all approved payment messages sent to the participant from all other participants during that LVTS cycle. (position nette multilatérale)

multilateral net tranche 1 position

multilateral net tranche 1 position means, for each participant, at any time during an LVTS cycle, the value obtained by subtracting

• (a) the sum of all approved payment messages sent by the participant to all other participants as tranche 1 payment messages during that LVTS cycle

from

• (b) the sum of all approved payment messages sent to the participant from all other participants as tranche 1 payment messages during that LVTS cycle. (position nette multilatérale de tranche 1)

multilateral net tranche 2 position

multilateral net tranche 2 position means, for each participant, at any time during an LVTS cycle, the value obtained by subtracting

• (a) the sum of all approved payment messages sent by the participant to all other participants as tranche 2 payment messages during that LVTS cycle

from

• (b) the sum of all approved payment messages sent to the participant from all other participants as tranche 2 payment messages during that LVTS cycle. (position nette multilatérale de tranche 2)

participant

participant means the Bank of Canada and each other member that has been admitted to participate in the LVTS whose status as a participant has not been revoked in accordance with section 15 and that has not withdrawn in accordance with section 17. (participant)

payee

payee means, in relation to a payment message received by a receiving participant, the person, including the receiving participant or another financial institution, to whom the amount of the payment message is to be paid or credited, whether or not that person is the ultimate beneficiary of that amount. (bénéficiaire)

payment confirmation reference number

payment confirmation reference number means a number attached by the LVTS to a payment message on passage of the risk control tests identifying the payment as one that has passed all risk control tests applicable to that payment. (numéro de confirmation du paiement)

payment message

payment message means an electronic message sent through the LVTS, in the format set out in the rules, from one participant to another instructing the receiving participant to pay a fixed amount of money to a payee. (message de paiement)

payment queue

payment queue means the payment message storage mechanism by which payment messages that have not passed the applicable risk control tests may be stored until such time as the payment messages are delivered to the receiving participants or returned to the sending participants in accordance with this by-law and the rules. (file d’attente de paiement)

pledge

pledge means a grant to the Bank of Canada of a security interest in collateral as security for any advances of funds that the Bank of Canada may make for the purposes described in section 30 and includes a grant of a security interest in which the Bank of Canada does not take possession of the collateral. (nantissement)

President

President means the President of the Association or, in the absence, incapacity or incompetence of the President, any person authorized by the Board to perform the duties of the President. (président)

receiving participant

receiving participant means a participant that receives a payment message from another participant. (participant destinataire)

rules

rules means the rules made by the Board respecting this by-law. (règles)

sending participant

sending participant means a participant that sends a payment message to another participant. (participant expéditeur)

settlement

settlement means the settlement of a participant’s multilateral net position as described in section 53. (règlement)

settlement account

settlement account means an account on the books of the Bank of Canada through which settlement of a participant’s multilateral net position is effected. (compte de règlement)

system-wide percentage

system-wide percentage means the percentage, of not less than 0 and not more than 100 per cent, set out in the rules, that is used for calculating a participant’s maximum ASO and tranche 2 net debit cap. (pourcentage global)

tranche 1 net debit cap

tranche 1 net debit cap means, for each participant, the maximum negative amount, calculated in accordance with section 19, of its multilateral net tranche 1 position, except that the tranche 1 net debit cap for the Bank of Canada is unlimited. (limite de débit net de tranche 1)

tranche 1 payment message

tranche 1 payment message means a payment message sent by a participant that is designated by that participant to be subject to its tranche 1 net debit cap. (message de paiement de tranche 1)

tranche 2 net debit cap

tranche 2 net debit cap means, for each participant, the maximum negative amount, calculated in accordance with section 23, of its multilateral net tranche 2 position. (limite de débit net de tranche 2)

tranche 2 payment message

tranche 2 payment message means a payment message sent by a participant that is designated by the participant to be subject to its tranche 2 net debit cap and to the bilateral credit limit established for the sending participant by the receiving participant. (message de paiement de tranche 2)

Scope and Application

• 2 (1) This by-law governs clearing and settlement arrangements relating to payments made through the LVTS and the conduct and affairs of all persons in connection with the operation and administration of the LVTS.

• (2) Every participant is bound by and shall comply with the provisions of this by-law and the rules.

• (3) Except as expressly provided in this by-law or the rules, nothing in this by-law or the rules shall affect or be interpreted so as to affect the rights or liabilities of any person at law.

• (4) Except as expressly provided in this by-law or the rules, nothing in this by-law or the rules shall be interpreted as imposing, or be deemed to impose, on any participant or on the Association any duty, liability or obligation towards anyone.

• (5) At any time when the LVTS is suspended or inoperative, this by-law shall not apply to any payment made between participants or any action taken, or not taken, by a participant on the basis of any such payment, unless the payment message has passed all risk control tests applicable to that payment message as set out in this by-law.

Administration and Operation of the LVTS

Administration

• 3 (1) The Association has the responsibility for all matters respecting the management of the day-to-day operations of the LVTS and the ongoing maintenance of the LVTS.

• (2) In carrying out the duties set out in subsection (1), the Association may contract out certain functions including the maintenance of the LVTS computer system and the physical operation site, but that contracting out does not derogate from the Association’s overall responsibilities to ensure that the LVTS performs all activities and functions required by this by-law and the rules.

Access to LVTS Information

4 Access by the participants or the Association to information relating to the operation of the LVTS and information relating to the positions of the participants shall be controlled in accordance with any procedures that may be set out in the rules.

Operation of the LVTS

• 5 (1) The LVTS shall be operational on all business days and available to all participants whose LVTS status has not been revoked or suspended.

• (2) Each participant whose LVTS status has not been revoked or suspended must be prepared to receive payment messages on all business days unless the participant is unable, due to technical difficulties, to successfully connect to the LVTS.

• (3) A participant that is not able to connect to the LVTS at the commencement of any given LVTS cycle may connect to the LVTS once the LVTS cycle has commenced by complying with the steps set out in section 6.

Commencement and Initialization of the LVTS Cycle

• 6 (1) Each LVTS cycle shall commence on notice of the commencement and initialization being given to all participants by the Association.

• (2) Following the notice of commencement and initialization, there shall be an initialization period during which the following steps shall be followed, in accordance with any procedures that may be set out in the rules:

  • (a) each participant that is active in the LVTS shall indicate to the Association that it is able to communicate with the LVTS and ready to participate in the LVTS cycle;

  • (b) the Association shall advise all participants of which participants have indicated their ability to communicate with the LVTS and their readiness to participate in the LVTS;

  • (c) each participant, except the Bank of Canada, shall set its tranche 1 net debit cap and shall set any bilateral credit limit that it is willing to establish for each of the other participants;

  • (d) the Association shall calculate and confirm each participant’s maximum ASO and tranche 2 net debit cap;

  • (e) each participant, other than the Bank of Canada, shall pledge collateral to the Bank of Canada in accordance with section 30 and shall apportion the value of collateral to reflect its tranche 1 net debit cap and its maximum ASO;

  • (f) the Bank of Canada shall provide to the Association a valuation for each participant’s collateral that has been pledged to the Bank of Canada for LVTS purposes;

  • (g) the Association shall verify that the value of the collateral apportioned by a participant for LVTS purposes does not exceed the value of the collateral pledged by the participant to the Bank of Canada for LVTS purposes; and

  • (h) any other steps that may be specified in the rules.

Payment Message Exchange Period

• 7 (1) On completion of the initialization period, the Association shall advise the participants that payment messages may be sent through the LVTS.

• (2) During the payment message exchange period, participants may send through the LVTS both payment messages that originate from the payment orders of third parties and payment messages that originate with the participants themselves.

• (3) The duration of the payment message exchange period is determined by the President and communicated by the Association to the participants.

Inter-Participant Payment Message Exchange Period

8 On completion of the payment message exchange period, only payment messages that originate with the participants themselves, rather than with third parties, may be sent through the LVTS.

Settlement Period

9 On completion of the inter-participant payment message exchange period, participants shall not send any further payment messages through the LVTS and the Bank of Canada shall commence the process of settling each participant’s multilateral net position on the books of the Bank of Canada.

Termination of LVTS Cycle

10 The LVTS cycle is terminated on completion of the settlement of all participants’ multilateral net positions, and the President shall notify all participants when termination of the LVTS cycle has occurred.

Exceptions

• 11 (1) In accordance with section 65, the President may determine the need to have more than one LVTS cycle on any business day and shall communicate that fact to all participants.

• (2) An LVTS cycle may not commence unless the preceding LVTS cycle has terminated.

• (3) An LVTS cycle may span more than one business day, and in that case all payments made during the LVTS cycle retain the value date as at the commencement of the LVTS cycle.

Liability of the Association

12 Except in the case of wilful misconduct of the Association, the Association, its directors and its employees have no liability whatsoever to any member for any loss or expense suffered, or liability incurred, by that member arising from the Association’s acts or omissions in connection with the LVTS, including, without limitation, a loss resulting directly or indirectly from

• (a) a failure to transmit, send, approve or otherwise process a payment message or administrative message;

• (b) an error caused by the LVTS;

• (c) the LVTS’s failure to accurately record a bilateral credit limit or modification or failure to calculate and accurately record a net debit cap; or

• (d) the LVTS’s sending of a payment message in excess of a bilateral credit limit or an applicable net debit cap.

Access to the LVTS

Participants

13 Any member may, on completion of any application procedures that may be set out in the rules, become a participant in the LVTS if that member

• (a) has established and maintains a settlement account at the Bank of Canada and has entered into any agreements that may be required by the Bank of Canada governing the settlement of its multilateral net position, the provision by the Bank of Canada of advances for LVTS purposes and the pledging of collateral to secure those advances and any other agreements that the Bank of Canada may require from time to time;

• (b) has met any technical and other requirements that may be set out in the rules; and

• (c) has paid

  • (i) an admission fee calculated in accordance with the rules, which admission fee shall be based on the administrative costs related to its admission as a new participant, and

  • (ii) to the extent that the member, as a new participant, did not participate in the financing of the development costs (including the costs of upgrades), a reasonable share, calculated in accordance with the Canadian Payments Association By-law No. 2 — Finance, of the unamortized portion of those development costs plus interest as at the date of its becoming a participant.

Suspension of Participant Status

• 14 (1) Any participant, except the Bank of Canada, that does not at all times comply with paragraph 13(a) shall, on notice being given of that fact by the Bank of Canada to the President, have its participant status suspended automatically.

• (2) The President may at any time suspend any participant’s status as a participant, if the participant fails to meet or continue to meet the criteria for participant eligibility set out in paragraph 13(b).

• (3) The President shall, as soon as reasonably practicable, notify all participants of the name of any participant that has had its participant status suspended.

Revocation of Participant Status

• 15 (1) The Board may at any time revoke the participant status of a participant, except the Bank of Canada, if that participant

  • (a) does not at all times comply with paragraph 13(a); or

  • (b) fails to meet or continue to meet the criteria for participant eligibility set out in paragraph 13(b).

• (2) The President shall, as soon as reasonably practicable, notify all participants of the name of any participant that has had its participant status revoked.

Reinstatement

• 16 (1) In the event that a participant’s status as a participant is suspended or revoked, the member may apply to the Association for reinstatement, in accordance with any procedures that may be set out in the rules, once the failure leading to the suspension or revocation has been corrected.

• (2) As a condition to reinstatement, a member referred to in subsection (1) shall be required to pay an admission fee calculated in accordance with paragraph 13(c).

Withdrawal of Participant

• 17 (1) Any participant may withdraw from participation in the LVTS after notifying the President of its intention to withdraw and paying all expenses associated with its participation in the LVTS that may be specified in the rules.

• (2) If a participant’s notice of its intention to withdraw from participation occurs during an LVTS cycle, the withdrawal does not take effect before the termination of that LVTS cycle.

Survival of Rights and Obligations

• 18 (1) In the event that a participant’s status as a participant is suspended or revoked, any payment liabilities and obligations of that participant pursuant to this by-law and any payment rights and entitlements of that participant pursuant to this by-law survive the suspension or revocation as if the participant were still a participant.

• (2) Any rights or obligations that, in accordance with subsection (1), survive the suspension or revocation of a participant shall be settled for pursuant to this by-law as if that participant were still a participant.

Establishment of Tranche 1 Net Debit Cap

Tranche 1 Net Debit Cap

• 19 (1) Each participant, with the exception of the Bank of Canada, shall, during the initialization period of each LVTS cycle, set its own tranche 1 net debit cap, failing which its tranche 1 net debit cap is set at zero for the LVTS cycle then commencing.

• (2) The absolute value of each participant’s tranche 1 net debit cap is an amount equal to the value of the collateral, as determined by the Bank of Canada in accordance with section 31, apportioned in support of its tranche 1 payment messages for the LVTS cycle.

Increase of Tranche 1 Net Debit Cap

20 In accordance with any procedures that may be set out in the rules, a participant may at any time during an LVTS cycle increase its tranche 1 net debit cap by

• (a) subject to subsection 25(2), apportioning additional collateral that has been pledged to the Bank of Canada for LVTS purposes to reflect the increased tranche 1 net debit cap; or

• (b) pledging additional collateral to the Bank of Canada for LVTS purposes, subject to valuation by the Bank of Canada in accordance with section 31, and apportioning the value of that additional collateral to reflect the increased tranche 1 net debit cap.

Decrease of Tranche 1 Net Debit Cap

• 21 (1) In accordance with any procedures that may be set out in the rules, a participant may at any time during an LVTS cycle reduce its tranche 1 net debit cap by changing the apportionment of its collateral pledged to the Bank of Canada to reflect the decreased tranche 1 net debit cap.

• (2) Where a participant’s multilateral net tranche 1 position is negative, the value of the collateral apportioned by the participant under subsection (1) to reflect its tranche 1 net debit cap may not be reduced below the absolute value of that negative multilateral net tranche 1 position.

Establishment of Bilateral Credit Limits

Notice During Initialization

• 22 (1) During the initialization period of each LVTS cycle, each participant, other than the Bank of Canada, shall, in accordance with any procedures that may be set out in the rules, set the amount of any bilateral credit limits it is willing to establish for any of the other participants.

• (2) Any bilateral credit limits that are not set by a participant are deemed to be set at zero.

• (3) A bilateral credit limit shall be established by the Bank of Canada for each of the other participants.

• (4) The bilateral credit limits established by the Bank of Canada are calculated during the initialization period of each LVTS cycle by applying a mathematical function, to be established from time to time by the Bank of Canada, to the other bilateral credit limits established for each participant.

Determination of ASO and Tranche 2 Net Debit Cap

• 23 (1) After each participant has established any bilateral credit limits for any of the other participants and the bilateral credit limits to be established by the Bank of Canada have been calculated, the Association shall calculate the maximum ASO of each participant and the tranche 2 net debit cap of each participant and give notice of those calculations to the participant.

• (2) The Association shall also give notice to each participant of the amount of any bilateral credit limits that have been established for it.

• (3) The tranche 2 net debit cap of a participant equals the product of the sum of the bilateral credit limits established for the participant by each of the other participants, multiplied by the system-wide percentage.

Increase of Bilateral Credit Limits

• 24 (1) In accordance with any procedures that may be set out in the rules, a participant may, at any time during an LVTS cycle, increase any of the bilateral credit limits it has established by notifying the Association of such a change.

• (2) If because of any increase referred to in subsection (1) there is any corresponding increase in the participant’s maximum ASO, the participant shall

  • (a) subject to section 21, apportion the value of additional collateral that has been pledged to the Bank of Canada for LVTS purposes to cover any such corresponding increase in its maximum ASO; or

  • (b) pledge additional collateral to the Bank of Canada for LVTS purposes, subject to valuation by the Bank of Canada in accordance with section 31, and apportion the value of that collateral to cover any such corresponding increase in the participant’s maximum ASO.

• (3) On acceptance by the Association of any increase in a bilateral credit limit effected by a participant under subsection (1), the relevant bilateral credit limits established by the Bank of Canada, any corresponding increase in the participant’s maximum ASO and any resulting increase in any participant’s tranche 2 net debit cap shall be recalculated accordingly.

• (4) The Association shall give notice to each participant of any increase in any bilateral credit limit established for that participant and of any increase in that participant’s tranche 2 net debit cap.

Reduction of Bilateral Credit Limits

• 25 (1) In accordance with any procedures that may be set out in the rules, a participant may at any time, without prior notice to any other participant, reduce any of the bilateral credit limits that it has established.

• (2) The maximum ASO and corresponding apportionment of collateral value of a participant who reduces any bilateral credit limit under subsection (1) shall not be reduced until the LVTS cycle has terminated.

• (3) On notice being given by a participant to the Association of any decrease in any of the bilateral credit limits it has established, the bilateral credit limits established by the Bank of Canada and any resulting decrease in any participant’s tranche 2 net debit cap shall be recalculated accordingly.

• (4) The Association shall give notice to each participant of any decrease in any bilateral credit limit established for that participant and of any decrease in that participant’s tranche 2 net debit cap.

Additional Settlement Obligation

Assumption of ASO

• 26 (1) The Association shall, in accordance with section 27, calculate an ASO for each participant that has established a bilateral credit limit in favour of a defaulting participant during an LVTS cycle.

• (2) An ASO referred to in subsection (1) is calculated by the Association for any participant, including a participant that is itself in default under section 56.

Calculation of ASO

27 Subject to sections 28 and 29, the amount of a participant’s ASO is equal to the product obtained when

• (a) the portion of the absolute value of a defaulting participant’s negative multilateral net position, if any, that exceeds the sum of the amount of the defaulting participant’s collateral pledged to the Bank of Canada in accordance with section 30 and the amount of any funds in the participant’s settlement account

is multiplied by

• (b) a fraction, the numerator of which is the largest bilateral credit limit established by the participant for the defaulting participant during the LVTS cycle, and the denominator of which is the sum of the largest bilateral credit limits established by each of the participants for the defaulting participant at any time during the LVTS cycle.

Maximum ASO

28 The amount of a participant’s maximum ASO is equal to the product of the largest bilateral credit limit established by that participant for any other participant, during the LVTS cycle, multiplied by the system-wide percentage.

ASO in Multiple Default Situation

• 29 (1) If two or more participants are in default under section 56, the amount of a participant’s ASOs, whether or not that participant is itself in default, shall be calculated as set out in section 27 for each of the participants in default.

• (2) The total ASOs payable by each participant shall be the sum of the ASOs calculated with respect to each defaulting participant.

• (3) If the sum of a participant’s ASOs exceeds its maximum ASO, the participant’s ASO with respect to each of the defaulting participants shall be reduced on a pro-rated basis based on the relative amounts of those ASOs, such that the sum of a participant’s ASOs does not exceed the participant’s maximum ASO.

Pledging of Collateral

Collateral Requirements

• 30 (1) Each participant, with the exception of the Bank of Canada, shall pledge collateral to the Bank of Canada as security for any advance that the Bank of Canada may make to that participant to enable the settlement of the participant’s negative multilateral net position, if any, to occur or to enable that participant to meet its ASOs.

• (2) The value of the collateral referred to in subsection (1), determined by the Bank of Canada under section 31, must be at least equal to the sum of the participant’s maximum ASO and the absolute value of its tranche 1 net debit cap for the LVTS cycle.

• (3) During the initialization period of each LVTS cycle, each participant shall confirm the apportionment of the collateral between its tranche 1 net debit cap and its maximum ASO in accordance with any procedures that may be set out in the rules.

Valuation of Collateral

• 31 (1) Any collateral pledged by a participant for LVTS purposes during the initialization period of an LVTS cycle is subject to valuation by the Bank of Canada during that period.

• (2) Any additional collateral pledged by a participant for LVTS purposes at any time during an LVTS cycle pursuant to section 20 or 24 is subject to valuation by the Bank of Canada at the time the pledge is made.

• (3) If, on valuation of the collateral by the Bank of Canada during the initialization period, the value assigned by the Bank of Canada to the collateral pledged is less than the value apportioned by the participant to cover its tranche 1 net debit cap and maximum ASO, the absolute value of the participant’s tranche 1 net debit cap shall be reduced by an amount equal to the difference.

• (4) If the absolute value of the participant’s tranche 1 net debit cap is reduced to zero and the value assigned by the Bank of Canada to the collateral is less than the participant’s maximum ASO, the bilateral credit limits established by the participant shall be reduced, in accordance with any procedures that may be set out in the rules, so that its maximum ASO is not greater than the value assigned to the collateral by the Bank of Canada.

Revaluation of Collateral

• 32 (1) The Bank of Canada may revalue the collateral pledged by a participant to the Bank of Canada for LVTS purposes at any time during an LVTS cycle.

• (2) If the revaluation results in a decrease in the value assigned by the Bank of Canada to the collateral such that the value of the collateral is less than the sum of the participant’s maximum ASO and the absolute value of its tranche 1 net debit cap, the Bank of Canada shall notify the President who in turn shall notify the participant of that fact.

• (3) The participant referred to in subsection (2) shall, within a time limit specified by the Bank of Canada, pledge additional collateral as required to raise the amount of collateral to an amount at least equal to the sum of the participant’s maximum ASO and the absolute value of its tranche 1 net debit cap.

• (4) If the participant does not pledge the required additional collateral referred to in subsection (3), the participant’s tranche 1 net debit cap shall, despite subsection 21(2), be reduced by an amount equal to the amount by which the new value assigned by the Bank of Canada to the collateral is less than the sum of the participant’s maximum ASO and the absolute value of its tranche 1 net debit cap.

Availability of Collateral

• 33 (1) Collateral pledged to the Bank of Canada for LVTS purposes that has been apportioned as required for an LVTS cycle is not available to the participant for any other purpose until the termination of that LVTS cycle.

• (2) If the value of the participant’s collateral pledged exceeds the sum of the participant’s maximum ASO and the absolute value of its tranche 1 net debit cap, the participant shall, on request for a release being made to the Bank of Canada, obtain a release of the excess collateral from the pledge.

• (3) On the termination of the LVTS cycle, the Bank of Canada shall, on request for a release being made by the participant to the Bank of Canada, release the collateral from the pledge unless the collateral is required as security for advances made by the Bank of Canada to enable the settlement of the participant’s negative multilateral net position, if any, to occur or to enable that participant to meet its ASO for that LVTS cycle.

Exchange of Payment Messages

Payment Items

34 Payment messages are approved as a class of payment items.

Payment Messages

35 Each participant may, in accordance with any procedures that may be set out in the rules, send a tranche 1 payment message or a tranche 2 payment message to any other participant.

Amount of Payment Messages Sent

36 Unless otherwise specified in the rules, there is no minimum or maximum dollar amount for any payment message sent through the LVTS.

Timing of Payment Messages

37 Subject to any statutory or regulatory constraints, each participant shall ensure that certain percentages of the total value or volume of payment messages that it is sending to other participants during any LVTS cycle are sent by certain stated times that may be set out in the rules.

Clearing of Payment Messages

Payment Messages Received

• 38 (1) For the purposes of section 52, a payment message sent through the LVTS is deemed received by the receiving participant when the payment message has passed all risk control tests applicable to that payment message that are set out in this by-law.

• (2) The deemed receipt of a payment message by the receiving participant immediately creates an obligation of the sending participant to pay the receiving participant the amount of the payment message.

• (3) The payment obligation of the sending participant referred to in subsection (2) is an obligation of the participant as principal for its own account, regardless of whether the participant is sending the payment at the request of a customer, and the corresponding right of the receiving participant to payment is a right of that participant as principal for its own account, regardless of whether the payment is received for the purpose of making payment to a payee other than that participant.

Tranche 1 Payment Messages

• 39 (1) A tranche 1 payment message is considered to pass the risk control tests for tranche 1 payment messages if the sending participant’s multilateral net tranche 1 position determined after the inclusion of the amount of the payment message is not less than the maximum permissible negative amount of the sending participant’s multilateral net tranche 1 position as determined by its tranche 1 net debit cap.

• (2) If a tranche 1 payment message does not pass the risk control tests for tranche 1 payment messages, the payment message is, subject to any conditions that may be set out in the rules, placed in the payment queue or returned to the sending participant.

Tranche 2 Payment Messages

• 40 (1) A tranche 2 payment message is considered to pass the risk control tests for tranche 2 payment messages if

  • (a) after the inclusion of the amount of the payment message in the calculation of the bilateral position between the sending participant and the receiving participant, the bilateral credit limit established for the sending participant by the receiving participant is not exceeded; and

  • (b) after the inclusion of the amount of the payment message in the calculation of the multilateral net tranche 2 position of the sending participant, the multilateral net tranche 2 position of the sending participant is not less than the maximum permissible negative amount of the sending participant’s multilateral net tranche 2 position as determined by its tranche 2 net debit cap.

• (2) If a tranche 2 payment message does not pass the risk control tests for tranche 2 payment messages, the payment message is, subject to any conditions that may be set out in the rules, placed in the payment queue or returned to the sending participant.

Payment Queue

41 A payment message that is transferred to the payment queue is managed as may be specified in the rules.

No Reversal of Transaction

42 No adjustment, reversal or unwinding of any approved payment message may be made under any circumstances.

Finality of Payment to Payees

Timing of Payments to Payees

• 43 (1) On actual receipt by a receiving participant of a payment message, the receiving participant shall make the amount of the payment message finally and irrevocably available to the payee on the earlier of

  • (a) the end of the LVTS cycle, and

  • (b) a reasonable request by the payee being made to the receiving participant for the amount of the payment message.

• (2) In making the amount of a payment message available to a payee in accordance with subsection (1), a receiving participant shall, if the payee so requests, provide the payee with the payment confirmation reference number for the amount being made available.

• (3) The absence of a request for the payment confirmation reference number in no way affects a receiving participant’s obligation under subsection (1) to make the amount of the payment message finally and irrevocably available.

• (4) Before the actual receipt of a payment message, a receiving participant shall not make the amount of the payment message available to the payee as the completion of a payment sent through the LVTS.

• (5) If a receiving participant makes the amount of a payment message available to the payee before the actual receipt of the payment message, that amount is deemed to be finally and irrevocably available if

  • (a) the payee requests a payment confirmation reference number; and

  • (b) the receiving participant provides the payee with the amount of the payment as well as with a number that it represents as being the payment confirmation reference number.

Exceptions

• 44 (1) Despite the requirements of section 43,

  • (a) if, in the receiving participant’s relationship with the payee at the time the funds are to be made available, action is usually taken by the branch of account in order for the funds to be made available to the payee and either the branch of account is closed on the day the payment message is received by the participant or the payment message is received by the participant within an amount of time, as may be set out in the rules, prior to the close of business of the branch of account for the business day, the receiving participant may make the amount of the payment message finally and irrevocably available to the payee after the end of the LVTS cycle but in any event not later than the beginning of the next day that the branch of account is opened for the purpose of making such funds available or as soon after that time as is reasonably practicable;

  • (b) if the payment message has been received by the receiving participant after such time as may be set out in the rules, prior to the end of the LVTS cycle, the receiving participant may make the amount of the payment message finally and irrevocably available to the payee after the end of the LVTS cycle but in any event not later than the beginning of the next business day; or

  • (c) if the receiving participant, having exercised such standard of care in the operation of its systems as is reasonable in the circumstances and having employed such alternative operations and procedures to make the amount of the payment message available as are reasonable in the circumstances, cannot comply with the obligation to make the amount of the payment message available as set out in section 43 due to a technical malfunction beyond the reasonable control of the participant or other event beyond the reasonable control of the participant that directly impairs the continued normal functioning of the receiving participant’s operating systems and procedures, the receiving participant may make the amount of the payment message finally and irrevocably available to the payee after the end of the LVTS cycle but as soon as practicable after the restoration of the normal functioning of the receiving participant’s operating systems and procedures and in any event shall make the amount of the payment message available not later than the end of the next business day following the day the restoration is completed.

• (2) For greater certainty, under no circumstances does the failure or default of any participant constitute a reason for a participant not having to comply with its obligations set out in section 43.

Finality of Payment

45 For the purposes of sections 43, 44 and 46 to 51, once a receiving participant has actually received a payment message, final and irrevocable availability of the amount of the payment message by a receiving participant to a payee is deemed to occur on the earliest of

• (a) credit in the amount of the payment message, less any service charges (subject to any provisions that may be set out in the rules regarding the disclosure and the manner of processing of service charges), being made to the account of the payee,

• (b) lawful application by the receiving participant of the amount of the payment message, less any service charges (subject to any provisions that may be set out in the rules regarding the disclosure and the manner of processing of service charges), to a debt of the payee, and

• (c) any other action by the receiving participant that has the effect of permitting the payee to have access to the amount of the payment message, less any service charges (subject to any provisions that may be set out in the rules regarding the disclosure and the manner of processing of service charges).

Error

• 46 (1) Despite the requirements of section 43, a receiving participant shall, in accordance with any procedures that may be set out in the rules, either return the amount of a payment message to the sending participant or take steps to correct the message if

  • (a) the receiving participant’s error detection system whether automated or otherwise discovers, before making the amount of a payment message available to a payee, that

    • (i) the payee’s name and the payee account number indicated on the payment message identify different persons,

    • (ii) the payment message erroneously instructs payment to a person other than the payee intended,

    • (iii) the payment message erroneously instructs payment in an amount other than the amount intended,

    • (iv) the payment message is an erroneously transmitted duplicate of a payment message previously transmitted by the sending participant, or

    • (v) there is an error or omission in the payment message by reason of which the receiving participant cannot, without correcting the error or omission, make the amount of the payment message available to the payee; or

  • (b) an individual acting on behalf of the receiving participant is directly involved in making the amount of the payment message available to the payee and that individual has knowledge, before making the amount of that payment message available to the payee, that any of subparagraphs (a)(i) to (v) apply to that payment message.

• (2) If the payment message is returned to the sending participant, the receiving participant shall be relieved of its obligations under section 43.

• (3) If the receiving participant corrects the payment message, the receiving participant shall make the amount of the payment message finally and irrevocably available to the payee within the applicable time period set out in sections 43 and 44, except that the time of receipt of the payment message is deemed to be the time at which the receiving participant corrected the payment message.

• (4) A receiving participant has no duty to detect any of the circumstances set out in subparagraphs (1)(a)(i) to (v).

Inability to Credit Payee

47 Despite the requirements of section 43, a receiving participant is relieved of its obligation set out in that section to make the amount of a payment message available to the payee and shall return the amount of that payment message to the sending participant, in accordance with any procedures that may be set out in the rules, if a prior request has been made by the payee that the amount of the payment message not be made available to it or the receiving participant cannot make the amount of a payment message available to the payee because of

• (a) a prior restriction having been placed on the account of the payee or on the account holder by the receiving participant; or

• (b) a prior restriction having been ordered, or a prior request having been made, by a competent authority that restricts the ability of the receiving participant to make the funds available to the payee.

Obligations and Liability of a Receiving Participant

• 48 (1) The obligations of a receiving participant set out in sections 43 to 47 and 49 are to the payee.

• (2) No obligation is owed by the receiving participant to the sending participant or to the customer of the sending participant who originated the payment message, solely because of sections 43 to 47 and 49.

• (3) Where the receiving participant fails to perform its obligations set out in sections 43 to 47 and 49, the payee may make a claim for loss of interest, if the payee is otherwise entitled to such interest.

Identification of Payee

• 49 (1) If a payment message received by a receiving participant specifies an account number, in the form that may be set out in the rules, in identifying the payee to whom the amount of the payment message is to be made available, the receiving participant may rely on that account number in making the amount of the payment message available.

• (2) If the receiving participant makes the amount of the payment message available to the payee by relying on the account number, the receiving participant has satisfied its obligations to the payee under sections 43 to 48 and 50 even if the account number identifies a person different from the person identified by name in the payment message, provided that, where an individual acting on behalf of the receiving participant is directly involved in making the amount of a payment message available to the payee, that individual has no knowledge, prior to the amount of the payment message being made available to the payee, that the account number identifies a person different from the person identified by name.

• (3) If the individual referred to in subsection (2) has the prior knowledge referred to in that subsection, the receiving participant is, in accordance with section 46, relieved of its obligations set out in subsections 43(1) to (3).

• (4) The receiving participant has no duty to detect any inconsistency in identification even when it does not rely on an individual in making the amount of a payment message available to a payee.

Rights of a Payee

50 The rights of a payee under sections 43 to 49 and 51

• (a) may not be diminished by agreement or rule; and

• (b) are in addition to, and shall not diminish, any other rights that the payee may have under the general law.

Rights of Recourse

51 Nothing in sections 43 to 50 affects any right or remedy that a participant or any person may have under the general law, including, without limitation, the law governing mistake, unjust enrichment or restitution to recover the amount or excess amount of a payment message from any person after that amount was erroneously made available under this by-law including, without limitation, on the basis of

• (a) an erroneous payment message that results in payment being made to a person not intended to receive payment;

• (b) an erroneous payment message that results in payment being made to a payee in an amount other than the amount intended; or

• (c) an erroneously transmitted duplicate payment message.

Multilateral Netting

Netting of Payments

• 52 (1) On the deemed receipt, as referred to in section 38, by a receiving participant of a payment message, the obligation of the sending participant (in this section the “debtor participant”) to pay the amount of the payment message to the receiving participant (in this section the “creditor participant”) and the right of the creditor participant to receive the amount of the payment message from the debtor participant are extinguished and replaced by

  • (a) an obligation of the debtor participant to pay the amount of the payment message to all participants jointly; and

  • (b) a joint obligation of all participants to pay the amount of the payment message to the creditor participant.

• (2) The rights of a participant to receive payments due to it from all participants jointly are netted and set off against the obligations of that participant to pay all payments due by it to all participants jointly.

• (3) The netting processes set out in subsections (1) and (2) occur simultaneously, and each is deemed to be automatic and continuous without any action by any person, and constitutes a complete and final discharge and payment of the obligations of each participant to the extent that they are netted.

• (4) The balance calculated from this netting is the multilateral net position of that participant.

• (5) The multilateral net position of a participant shall be the only amount owing by or to that participant.

Settlement of Multilateral Net Positions

Settlement

• 53 (1) After the end of the inter-participant payment message exchange period set out in section 8, the Bank of Canada shall make a single credit entry or, to the extent that funds are available in a participant’s settlement account, make a single debit entry to the settlement account of each participant to settle each participant’s multilateral net position.

• (2) Settlement of a participant’s multilateral net position shall not be effected until settlement of the multilateral net positions of all participants can be effected.

Provision of Liquidity

54 If insufficient funds are available in the settlement account of a participant to settle that participant’s negative multilateral net position, that participant shall, immediately on demand by the Bank of Canada or within such time period as may be specified by the Bank of Canada, apply to the Bank of Canada for a discretionary advance to enable settlement of the participant’s negative multilateral net position.

Finality of Settlement

55 Settlement on the books of the Bank of Canada is final and irrevocable.

Procedure on Default

Default of a Participant

• 56 (1) A participant is in default for the purposes of the LVTS if, immediately on demand by the Bank of Canada or within any time period that may be specified by the Bank of Canada, it fails to obtain a discretionary advance from the Bank of Canada to enable it to settle its negative multilateral net position.

• (2) The Bank of Canada shall notify the President of any participant in default and the President shall notify all participants of any such default.

• (3) On the default of any participant, sections 57, 58 and 60 apply to ensure that settlement occurs.

Defaulting Participant

• 57 (1) If a participant is in default for failure to settle its negative multilateral net position as set out in section 56, the Bank of Canada shall provide an advance of funds to the defaulting participant solely for the purpose of permitting it to settle.

• (2) The advance shall be in an amount equal to the lesser of

  • (a) the absolute value of the defaulting participant’s negative multilateral net position less the amount of funds in the defaulting participant’s settlement account, and

  • (b) the sum of the defaulting participant’s maximum ASO and the absolute value of its tranche 1 net debit cap.

• (3) The absolute value of the defaulting participant’s tranche 1 net debit cap is calculated in accordance with section 19, 20 or 21, as applicable.

• (4) If the amount of the advance is sufficient to enable settlement of the defaulting participant’s negative multilateral net position, the Bank of Canada shall immediately debit the participant’s settlement account to effect settlement of its negative multilateral net position and shall simultaneously effect settlement of all other participants’ multilateral net positions.

• (5) If the amount of the advance is insufficient to enable settlement of the defaulting participant’s negative multilateral net position, that position shall be settled according to the procedures set out in section 58.

• (6) The repayment of any advances made by the Bank of Canada to the defaulting participant and the Bank of Canada’s rights with respect to the defaulting participant’s collateral are governed by the agreements between the defaulting participant and the Bank of Canada.

Remaining Participants

• 58 (1) If the amount of the advance made by the Bank of Canada under section 57 is not sufficient to permit settlement of the defaulting participant’s negative multilateral net position, the remaining participants are obligated to meet their ASOs, as set out in section 27, by advancing funds to the defaulting participant, within the time limit and in the manner that are specified by the Bank of Canada.

• (2) To the extent that a remaining participant has funds available in its settlement account, the Bank of Canada shall effect payment of that participant’s ASO by transferring funds from the remaining participant’s settlement account to the settlement account of the defaulting participant.

• (3) To the extent that there is an insufficient positive account balance in a remaining participant’s settlement account to discharge the remaining participant’s ASO, the Bank of Canada shall provide the remaining participant with an advance of funds, by crediting the remaining participant’s settlement account, to enable it to pay its ASO and shall effect payment of the remaining participant’s ASO by transferring funds from the remaining participant’s settlement account to the settlement account of the defaulting participant.

• (4) Immediately on transferring sufficient funds from the settlement accounts of the remaining participants to enable settlement of the defaulting participant’s negative multilateral net position, the Bank of Canada shall debit the settlement account of the defaulting participant to effect settlement and shall simultaneously effect settlement of all participants’ multilateral net positions.

• (5) The repayment of any advances to remaining participants and the Bank of Canada’s rights with respect to the remaining participants’ collateral are governed by agreements between the participants and the Bank of Canada.

Debt of the Defaulting Participant to Remaining Participants

59 A defaulting participant is obligated to reimburse a participant for the amount that the participant advanced to the defaulting participant because of the participant’s ASO, and that amount constitutes a debt of the defaulting participant that survives irrespective of whether the defaulting participant has its status as a participant suspended or revoked.

Bank of Canada Commitment to Settle Accounts

• 60 (1) If in an LVTS cycle more than one participant is in default for failure to settle as set out in section 56, the procedures on default set out in sections 57 and 58 shall be followed for each of the defaulting participants and the remaining participants are obligated to meet their ASOs as set out in section 29, subject to their respective maximum ASOs.

• (2) Despite any maximum ASO that the Bank of Canada may have, if, after such procedures on default have been followed, the negative multilateral net positions of all participants that are in default have not been settled, the Bank of Canada shall advance funds to the defaulting participants to enable settlement of the negative multilateral net positions of those participants and the termination of the LVTS cycle.

Debt of Defaulting Participant to the Bank of Canada

61 A defaulting participant is obligated to reimburse the Bank of Canada the amount that is advanced to it by the Bank of Canada in accordance with section 60 and that amount constitutes a debt of the defaulting participant that survives irrespective of whether the defaulting participant has its status as a participant suspended or revoked.

Declaration on Status of a Participant

Declaration Made during an LVTS Cycle

62 If, at any time during an LVTS cycle, a federal or provincial regulator or other supervisory body takes control of a participant or its assets or makes a declaration, in respect of a participant, that the participant is considered to be no longer viable or that the participant is unable to meet its liabilities as they become due, the President shall, immediately on becoming aware of such an action having been taken or such a declaration having been made, suspend the participant from further participation in that LVTS cycle and notify all the participants of that fact.

Declaration Made Outside of an LVTS Cycle

63 If, after the termination of an LVTS cycle and before the opening of the following LVTS cycle, a federal or provincial regulator or other supervisory body takes control of a participant or its assets or makes a declaration, in respect of a participant, that the participant is considered to be no longer viable or that the participant is unable to meet its liabilities as they become due, the participant shall have its status for the following LVTS cycle suspended, unless otherwise indicated by the President.

Notice

Form of Notice

64 Any notice or other communication provided for or permitted under this by-law shall be in accordance with any procedures that may be set out in the rules.

Emergencies

Emergency Condition

65 In the event that communications between the LVTS central site and one or more participants are interrupted, the ability of the LVTS central site to receive, transmit, send, approve or otherwise process a payment message or administrative message is impaired, the safe and efficient operation of the LVTS is placed into question or some other emergency affects its operations, the President may, with the prior agreement of the Bank of Canada and any other persons that may be designated by the Board,

• (a) change the hours of operation of the LVTS;

• (b) direct any, several, or all of the participants not to make payments through the LVTS pending resolution of the problem;

• (c) order the immediate termination of the LVTS cycle and an immediate settlement of the LVTS cycle on the books of the Bank of Canada;

• (d) prohibit the commencement of an LVTS cycle; or

• (e) direct any other action that the President may deem necessary.

Procedures

66 Unless the President directs otherwise, the procedures to be followed on the occurrence of any of the events referred to in section 65 are those that may be set out in the rules.

Repeal

67 [Repeal]

Coming into Force

68 This by-law comes into force on the day on which it is registered.