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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

Access to the LVTS (continued)

Revocation of Participant Status

  •  (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.

  • SOR/2010-43, s. 9
  • SOR/2012-161, s. 1(F)

Reinstatement

  •  (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

  •  (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.

  • SOR/2010-43, s. 10

Survival of Rights and Obligations

  •  (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

  •  (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

 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

  •  (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

  •  (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

  •  (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

  •  (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

  •  (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

  •  (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

 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

 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.

 
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