Financial System

The Bank's contributions to the international financial system

The Bank of Canada

• collaborates with other central banks on research into the international financial system.
• provides experienced personnel to joint missions of the International Monetary Fund (IMF) and the World Bank.
• is a major participant in the Financial Stability Forum (FSF). The FSF was created to promote international financial stability through information exchange and international co-operation in financial supervision and surveillance.
• contributes to Canada's participation in G-20 discussions on exchange rate regimes, debt management, and the use of standards and codes.
• provides other technical assistance.
• provides ongoing support for the work of committees and working groups of the Bank for International Settlements (BIS) (Learn more . . .).

BIS reports concerning clearing and settlement systems include:

• Committee on Payments and Settlement Systems (CPSS) "Settlement risk in foreign exchange transactions" Report No. 17, March 1996
• CPSS "Core principles for systemically important payment systems" Report No. 43, January 2001
• CPSS-International Organization of Securities Commissions (IOSCO) "Recommendations for securities settlement systems" Report No. 46, November 2001
• CPSS "Policy issues for central banks in retail payments" Report No. 52, March 2003
• CPSS-IOSCO "Recommendations for central counterparties" Report No. 64, November 2004

Straight-Through Processing (STP) of Securities Transactions

In 2003, the Group of Thirty published a study of global clearing and settlement arrangements and made 20 recommendations on how to enhance them to improve the safety and efficiency of international securities markets. These recommendations include achieving straight-through processing (STP) of securities transactions (i.e., seamlessly passing information electronically, on a timely, accurate, system-to-system basis, to all parties involved without manual handling or redundant processing). This involves the elimination of all manual or duplicate steps, from trade origination to settlement.

In Canada, this initiative is being led by the Canadian Capital Markets Association (CCMA) which is a federally incorporated, not-for-profit organization that represents firms and organizations involved in Canada's securities industry. The CCMA is committed to keep up with international developments in the area of clearing and settlement systems in order to maintain the competitiveness of Canadian capital markets.

In October 2004, the CCMA changed its focus to the intermediate goal of achieving institutional trade-date matching (i.e., confirming the details of a trade the day it is executed) after a study showed that this was the area of greatest benefit to the Canadian marketplace, and an important milestone in achieving STP. The target date for completing the implementation of institutional trade-date matching is July 2007.

The CCMA and the Securities Industry Association (SIA), which leads this initiative in the United States, adopted the objective of achieving STP in 2002. Before that, their goal was to shorten the trade-settlement cycle for equities and long-term debt instruments from three days after a trade date (T+3) to the day following a transaction (T+1). The CCMA and the SIA consider that most of the benefits of a one-day trade settlement cycle can be achieved through STP at a lower cost.