IIAC’S FEEDBACK TO THE GOVERNMENT OF CANADA MARKET FUNCTIONING STEERING GROUP (GMF): FAIL FEES
The GMF developed a framework to support Government of Canada market functioning in a low-rate environment with a proposed fail fee as part of the framework. The IIAC generally supports the introduction of a fail fee to help the settlement system in times of either near zero or negative interest rates or heightened periods of stress on Canadian fixed income markets. Generally, the parameters of the fail fee are viewed as appropriate for the present Government of Canada market. While the thresholds of the dynamic component are viewed to be well calibrated, there is a view by some of our members that as the Bank of Canada target rate rises, the fail fee could be reduced or even turned off. Our full submission is available here.