G18 - Government Policy and Regulation

• Canadian Securities Lending Market Ecology

  Staff Discussion Paper 2019-5 Jesse Johal, Joanna Roberts, John Sim

  This is the fourth of the Financial Markets Department’s descriptions of Canadian financial industrial organization. The paper discusses the organization of the securities lending market in Canada. We outline key characteristics of securities lending contracts, participants in the securities lending market, the market infrastructures that support securities lending activities, and aggregated statistics describing the Canadian market.

  Content Type(s): Staff Research, Staff Discussion Papers Topic(s): Financial Institutions, Financial markets, Financial system regulation and policies, Market structure and pricing JEL Code(s): G, G1, G18, G2, G21, G23

• Characterizing the Canadian Financial Cycle with Frequency Filtering Approaches

  Staff Analytical Note 2018-34 Andrew Lee-Poy

  In this note, I use two multivariate frequency filtering approaches to characterize the Canadian financial cycle by capturing fluctuations in the underlying variables with respect to a long-term trend. The first approach is a dynamically weighted composite, and the second is a stochastic cycle model.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Financial stability, Monetary and financial indicators, Recent economic and financial developments JEL Code(s): C, C0, C01, C1, C13, C14, C18, C3, C32, C5, C51, C52, E, E3, E32, E6, E66, G, G0, G01, G1, G18

• The Impact of Government Debt Supply on Bond Market Liquidity: An Empirical Analysis of the Canadian Market

  Staff Working Paper 2018-35 Jeffrey Gao, Jianjian Jin, Jacob Thompson

  This paper finds that Government of Canada benchmark bonds tend to be more illiquid over the subsequent month when there is a large increase in government debt supply. The result is both statistically and economically significant, stronger for the long-term than the short-term sector, and is robust when other macro factors are controlled for.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Asset Pricing, Debt Management, Financial markets JEL Code(s): D, D5, D53, G, G1, G12, G18, G2, G3, G32

• A Primer on the Canadian Bankers’ Acceptance Market

  Staff Discussion Paper 2018-6 Kaetlynd McRae, Danny Auger

  This paper discusses how the bankers’ acceptance (BA) market in Canada is organized and its essential link to the Canadian Dollar Offered Rate (CDOR). Globally, BAs are a niche product used only in a limited number of jurisdictions.

  Content Type(s): Staff Research, Staff Discussion Papers Topic(s): Financial Institutions, Financial markets, Financial system regulation and policies, Market structure and pricing JEL Code(s): G, G1, G18, G2, G21, G23
• June 7, 2018

  The Bank of Canada’s Financial System Survey

  Financial System Review - June 2018 Guillaume Bédard-Pagé, Ian Christensen, Scott Kinnear, Maxime Leboeuf

  This report presents the details of a new semi-annual survey that will improve the Bank of Canada’s surveillance across the financial system and deepen efforts to engage with financial system participants. The survey collects expert opinions on the risks to and resilience of the Canadian financial system as well as on emerging trends and financial innovations. The report presents an overview of the survey and provides high-level results from the spring 2018 survey.

  Content Type(s): Publications, Financial System Review Article Topic(s): Financial Institutions, Financial markets, Financial services, Financial stability, Financial system regulation and policies, Recent economic and financial developments JEL Code(s): C, C8, C83, G, G1, G11, G18, G2, G28, G3, G32

• Order Flow Segmentation, Liquidity and Price Discovery: The Role of Latency Delays

  Staff Working Paper 2018-16 Michael Brolley, David A. Cimon

  Latency delays—known as “speed bumps”—are an intentional slowing of order flow by exchanges. Supporters contend that delays protect market makers from high-frequency arbitrage, while opponents warn that delays promote “quote fading” by market makers. We construct a model of informed trading in a fragmented market, where one market operates a conventional order book and the other imposes a latency delay on market orders.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Financial markets, Financial system regulation and policies, Market structure and pricing JEL Code(s): G, G1, G14, G18

• Asymmetric Risks to the Economic Outlook Arising from Financial System Vulnerabilities

  Staff Analytical Note 2018-6 Thibaut Duprey

  When financial system vulnerabilities are elevated, they can give rise to asymmetric risks to the economic outlook. To illustrate this, I consider the economic outlook presented in the Bank of Canada’s October 2017 Monetary Policy Report in the context of two key financial system vulnerabilities: high levels of household indebtedness and housing market imbalances.

  Content Type(s): Staff Research, Staff Analytical Notes Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Financial stability, Financial system regulation and policies, Monetary and financial indicators, Recent economic and financial developments, Uncertainty and monetary policy JEL Code(s): C, C0, C01, C1, C11, C15, E, E1, E17, E3, E32, E37, E4, E44, E47, E5, E58, E6, E66, G, G0, G01, G1, G18
• November 16, 2017

  An Initial Assessment of Changes to the Bank of Canada’s Framework for Market Operations

  Bank of Canada Review - Autumn 2017 Kaetlynd McRae, Sean Durr, David Manzo

  The Bank of Canada made changes to several of the tools that make up its framework for operations and liquidity provision. These changes came about after a comprehensive re-view of the framework and are designed to help the Bank better achieve its objectives of reinforcing the target for the overnight rate and supporting the well-functioning of Cana-dian financial markets under normal market conditions.

  Content Type(s): Publications, Bank of Canada Review Article Topic(s): Financial markets, Financial stability, Monetary policy framework, Monetary policy implementation, Payment clearing and settlement systems, Transmission of monetary policy JEL Code(s): E, E4, E42, E44, E5, E52, E58, G, G0, G01, G1, G18

• Strategic Complementarities and Money Market Fund Liquidity Management

  Staff Working Paper 2017-14 Jonathan Witmer

  Following the financial crisis, there has been increased regulatory focus on the management of liquidity in mutual funds and, specifically, whether funds hold enough liquidity to guard against the potential for investor runs.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Financial Institutions, Financial markets JEL Code(s): F, F3, F30, G, G0, G01, G1, G18, G2, G20

• Managing Risk Taking with Interest Rate Policy and Macroprudential Regulations

  Staff Working Paper 2016-47 Simona Cociuba, Malik Shukayev, Alexander Ueberfeldt

  We develop a model in which a financial intermediary’s investment in risky assets—risk taking—is excessive due to limited liability and deposit insurance and characterize the policy tools that implement efficient risk taking.

  Content Type(s): Staff Research, Staff Working Papers Topic(s): Financial system regulation and policies, Monetary policy framework JEL Code(s): E, E4, E44, E5, E52, G, G1, G11, G18