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By-law No. 7 Respecting the Large Value Transfer System (SOR/2001-281)

Regulations are current to 2020-12-28 and last amended on 2020-07-16. Previous Versions

Interpretation and Application (continued)

Scope and Application

  •  (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.

  • SOR/2010-43, s. 2(F)

Administration and Operation of the LVTS

Administration

  •  (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

 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

  •  (1) The LVTS shall be operational on all business days and available to all participants whose LVTS status has not been revoked or suspended.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

  •  (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

  •  (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.

  • SOR/2010-43, s. 3

Inter-Participant Payment Message Exchange Period

 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

 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

 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.

  • SOR/2010-43, s. 4

Exceptions

  •  (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.

  • SOR/2010-43, s. 5

Liability of the Association

 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.

  • SOR/2010-43, s. 6

Access to the LVTS

Participants

 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.

  • SOR/2010-43, s. 7

Suspension of Participant Status

  •  (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 under subsection (1) or (2).

  • SOR/2010-43, s. 8
  • SOR/2012-161, s. 1(F)
  • SOR/2020-167, s. 1
 
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