Background
For an in-depth discussion of the prior submission and calculation processes, the events giving rise to the heightened regulatory interest in the Canadian Dollar Offered Rate (“CDOR”), and the rationale for reform to the setting of the benchmark rate, please refer to our earlier bulletin here.
By way of a brief background, CDOR is a money market reference rate. It was calculated using quotes voluntarily provided in a daily survey of market makers in bankers’ acceptances (“BA”). However the rate itself is also used in various floating rate financing arrangements, notes and derivatives. The reporting participants, namely Canada’s largest banks, used varying methods to prepare their bids but the process could be loosely described as adjusting the prior day’s CDOR rate and submission in light of changes in certain factors. The process was administered by Thomson Reuters; it conducted the survey daily at 10:00 am, averaged the submissions after excluding the high and low bid prices, and published the results on Reuters terminals by 10:15 am. CDOR rates were also reported on Bloomberg.
There has been a flurry of activity surrounding reference rates. In 2012, British Chancellor of the Exchequer established the Wheatley Review of LIBOR, which published a number of recommendations to address concerns surrounding the London Inter-Bank Offered Rate. In 2013, the Investment Industry Regulatory Organization of Canada (“IIROC”) followed suit and issued a similar report on CDOR, including its own recommendations to strengthen the safeguards around the integrity of the Canadian reference rate. And most recently in July 2013, the International Organization of Securities Commissions (“IOSCO”) released its final report identifying global ...
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...tivities and processes." Similarly, the submitters' code of conduct being prepared by the banks on the CDOR panel in consultation with IIROC and the Bank of Canada has yet to be published, but it is known that the code "will specify minimum standards for submission methodology, internal oversight and records retention" relating to CDOR submissions.
We will continue to monitor the ongoing initiatives by Canadian regulators and industry to strengthen the governance of CDOR and will provide market participants with information about any new developments as they arise.
by R.D. Jeffrey Rogers, Shahen Mirakian and Anna Tombs, Student-at-Law
a cautionary note
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
According to the preamble in the Bank of Canada Act,(Weir, 2012) the Bank's mandate is to:
CQC (2009) Guidance about compliance. Summary of regulations, outcomes and judgement. Available at: http://www.cqc.org.uk/sites/default/files/media/documents/guidance_about_compliance_summary.pdf Accessed on: 21/03/2014
9. Woodgate, R., Black, A., Biggs, J., Owens, D. (2003). Legal Studies for Queensland, Volume 1, ForthEdition, Legal Eagle Publications: Queensland. 10. Woodgate, R., Black, A., Biggs, J., Owens, D. (2003).
Forrester, K., & Griffiths, D. (2010). Essentials of law for health professionals. Sydney: Mosby Elsevier. Retrieved from Google Books.
Which of the rules of AICPA Code of Conduct is most related section 5062.2 of the California Accountancy Act? Explain your
This case is discussed here for informational purposes only and should not be construed as a
...y Fixed Exchange Rates: Recent Experiences." Introduction to International Economics. New York: Palgrave Macmillan, 2011. 368. Print.
Canadian Tire acts correctly to be a reliable company. Canadian Tire has a rule, which is called a Code of Business Conduct, for every employee. The rule shows employees how to act as a member of Canadian Tire (Canadian Tire, 2011, para1).
Caterpillar Inc. also faces the risk of its cash flow and earnings being affected by fluctuations in the exchange rates of currency, commodity prices, and interest rates. To control for this, the company’s Risk Management Policy ensures prudent management of interest rates, commodity prices, and exchange rates of foreign currency by allowing the use of derivative financial instruments. According to the policy, the derivative financial instruments are not supposed to be used for the purpose of speculation. In its pricing strategy, Caterpillar Inc. faces the risk of difficult shipping of its products. This risk can be encountered by offering its products on instalments and lease to its loyal customers (Caterpillar, Inc. (CAT), 2011).
Drab,B.(2005) Deterniments of Nominal Exchange Rates, Unpublished paper, International Financial Management, Harvard Business School, U.S.
Rob, Dixon, and Holmes Phil. Capital market; Stock exchanges; Foreign exchange market; Futures market. London: Chapman and Hall, 1992.
The implications of these findings are as follows. The works of these academics highlight the important point that there is higher volatility of capital charges for better quality credits (Goodhart & Taylor, 2004). This is because these credits face a steeper risk curve, as the movement within the ratings scale (from one rating to another) is much greater.
Their ease of conducting business and trading across borders ranks favorably for American consider expanding in Canada (Cubbage et al., 2010). The U.S. dollar because of its strength and purchasing power is attractive to many other countries including Canada. Imports and exports play a vital role in the attractiveness of the dollar. If a wood produced in Canada is less expensive than wood produced in the U.S. imports will escalate, and exports will plummet. These factors result in the U.S. dollar being more or less enticing to consumer and investors at various intervals. Robson & Laidler (2002) explored the possibility of Canada adopting the U.S. dollar as their official currency. They argued it reduces the cost of transactions and improves decision-making in Canada. Each government can print money based on a need to combat events such as inflation and deflation and, in turn, affect the exchange
Ritter, Lawrence R., Silber, William L., Udell, Gregory F. 2000, Money, banking, and Financial Markets, 10th edn, USA.
Gregor Meerganz von Medeazza, Economic and Political Weekly, Vol. 41, No. 11, Money, Banking and Finance (Mar. 18-24, 2006), pp. 949-952