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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

Additional Settlement Obligation (continued)

ASO in Multiple Default Situation

  •  (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

  •  (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

  •  (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

  •  (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.

  • SOR/2010-43, s. 11

Availability of Collateral

  •  (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

 Payment messages are approved as a class of payment items.

Payment Messages

 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

 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

 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

  •  (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

  •  (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

  •  (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

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

No Reversal of Transaction

 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

  •  (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.

 
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