A PROPOSED FAIL FEE FOR GOVERNMENT OF CANADA BONDS AND T-BILLS
On November 7, 2022, the Government of Canada Market Functioning Steering Group (GMF) published a consultation paper on a proposed fail fee for Government of Canada bond and treasury bill transactions. The GMF working group, of which the IIAC is an active member, was established by the Canadian Fixed-Income Forum (CFIF) in January 2020.
While the Government of Canada market is not currently experiencing a major fails issue, GMF and CFIF believe that it is advisable to put a fails framework in place to ensure that the settlement process continues to function in all rate environments. The proposed fail fee would be set at 50bps and it would apply to all delivery-versus-payment transactions settled through the Canadian Depository for Securities. If fails reach a high and persistent level, the proposed fee would increase to maximum of 150bp.
The consultation will remain open until December 9, 2022. Feedback can be provided here.