CDCC launches secured collateral notes program with BMO inaugural subscription

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CDCC launches collateral notes program

Highlights

CDCC completed the inaugural issuance of its Secured General Collateral Notes, rated Prime-1 (sf) by Moody's, with BMO subscribing on July 2 in Toronto.
The Bank of Canada included SGC Notes as eligible collateral under its Standing Liquidity Facility in June 2024, promoting development of the secured funding market.
SGC Notes, available through CDS and supported by CCMS, expand short-term secured investment options for institutional investors and aim to enhance Canadian financial system liquidity.

Launch details and market infrastructure

As reported by TMX Group, CDCC says the inaugural issuance of its Secured General Collateral, SGC, Notes program is executed and subscribed by BMO on July 2 in Toronto. CDCC, which acts as Canada's central clearing counterparty for exchange-traded derivatives and repurchase agreements, says the first issuance receives a Prime-1 (sf) rating from Moody's.

SGC Notes are designed for Canadian institutional money market investors as secured, short-term cash instruments backed by high-quality debt securities. The notes are also eligible within The Canadian Depository for Securities Limited, CDS, allowing investors to buy them directly from the subscriber.

CDCC says it is working with other eligible banks and dealers enabled on the Canadian Collateral Management Service, CCMS, so they can be onboarded as underwriters in the program. For subscriber banks and dealers, the corporation says the notes provide a funding solution through capital markets infrastructure intended to support reliability and resilience.

Implications for Canada's funding market

CDCC links the launch to a broader push to deepen secured funding and collateral markets in Canada. In June 2024, the Bank of Canada announces the inclusion of SGC Notes as eligible collateral under its Standing Liquidity Facility, a step CDCC describes as important for developing the new market.

Nick Chan, Head of Capital Allocation & Management at BMO Capital Markets, says the notes mark a meaningful step for Canada's short-term funding and collateral markets and help expand high-quality secured investment options while strengthening system liquidity. Karen McMeekin, President of CDCC, says the launch brings an additional alternative to the Canadian money market for end investors, while Marton Szigeti of Clearstream says the CCMS infrastructure supports greater liquidity, security and resilience across the country's financial system.

In our earlier article on Toronto-Dominion Bank’s $40 billion Global Medium Term Note Programme approval, we noted that the regulatory green light broadens TD’s access to wholesale funding and strengthens its ability to meet future liquidity needs. We also highlighted that, despite the constructive funding backdrop, TD shares were showing mixed technical signals and were expected to trade in a near-term consolidation range.

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