Canada: Spotlight On CDOR: What Lenders Need To Know

Co-author: Anna Tombs, Student-at-Law

On March 24, 2014, Bank of Canada Deputy Governor Timothy Lane announced that steps were being taken by industry and regulators to put in place a code of conduct with regards to the submissions made by the banks on the panel that provides the daily quotes used to determine the Canadian Dealer Offered Rate ("CDOR"). This follows an announcement in January 2014 by the Office of the Superintendent of Financial Institutions (Canada) ("OSFI") that it will begin supervising the effectiveness of governance and risk controls surrounding the submissions reporting participants make relating to CDOR.

As will be discussed in greater depth below, OSFI's announcement and expected framework aims to create greater consistency between the processes used to calculate CDOR and those being introduced to calculate its international equivalents. Further, the framework aims to enhance market integrity of and market confidence in CDOR.

1. Calculation of CDOR

Historically, CDOR has been determined daily from a survey of market makers in bankers' acceptances ("BAs"). Participation in the CDOR survey is voluntary and the inclusion of a reporting participant (i.e. a market maker) is not governed by any published criteria. Currently, the reporting participants are: (1) BMO Nesbitt Burns, (2) CIBC World Markets, (3) HSBC Bank Canada, (4) National Bank Financial, (5) RBC Dominion Securities, (6) Scotia Capital Inc. and (7) TD Securities Inc. Prior to January 31, 2014, Deutsche Bank Securities Limited and its affiliate also participated in the CDOR survey.

According to a report issued by the Investment Industry Regulatory Organization of Canada ("IIROC") in January 2013 (the "IIROC Report"), no consistent method is used by the reporting participants to establish the submitted rate. However, some similarities exist in terms of calculation methodology between reporting participants. For example, typically, a reporting participant will begin the calculation with its previous day's submission and the resultant CDOR rate. The reporting participant will then apply a calculation methodology that factors in: (1) the Bank of Canada overnight rate, (2) any funding pressures that exhibit a predictable pattern (mid-month and month end), (3) known funding commitments, (4) secondary BA trading (to the extent such information is available) and (5) changes in the overnight indexed swap (OIS) curve). After the rates are submitted, the highest and lowest rate are removed from the survey. High and low bid prices are excluded to minimize bias in the results.

2. CDOR Administration & Regulation

Since 2003, CDOR has been administered by (Thomson) Reuters ("Reuters"). Each business day, the survey is conducted at 10:00 and the calculated average appears on the Reuters Screen CDOR Page by 10:15 am. Reuters reports late, missing or unusual submissions to IIROC for further investigation.

Notably, neither current legislation nor IIROC rules explicitly address CDOR rate-setting activity and IIROC does not administer or regulate CDOR. Accordingly, OSFI has stated that its decision to commence regulating CDOR stemmed from an agreement reached among members of the Canadian Heads of Regulatory Agencies stating that "OSFI is best placed to assume a role, consistent with its mandate and expertise, in supervising the effectiveness of governance and risk controls surrounding banks' CDOR submission processes".

3. Controversies Surrounding International Benchmark Rates

The recent attention given to CDOR regulation followed from the international controversies surrounding international reference rates. In 2009, survey-based reference rates garnered international attention when the UK Financial Services Authority ("FSA") commenced an investigation relating to reference rates such as the London Inter-Bank Offered Rate ("LIBOR").

In June 2012, the British Chancellor of the Exchequer established the Wheatley Review of LIBOR ("Wheatley Review"). In September 2012, this review published a series of recommendations and steps for implementation. In brief, these recommendations stated: (1) that LIBOR should be reformed rather than replaced, (2) that submissions used for fixing LIBOR should be supported by transactional evidence in lieu of estimates and (3) that reporting participant should continue to play a significant role in the production and oversight of LIBOR.

4. IIROC Audit and Report

Although the aforementioned investigations and related settlements did not involve allegations with respect to CDOR and Canadian-based institutions given the vital role CDOR plays in the Canadian financial system, IIROC commenced a formal review of CDOR as a first step towards strengthening governance. The stated purpose of the review was to further explore practices related to the calculation, supervision and use of CDOR. As part of the review process, each reporting participant met with representatives from both IIROC and the Bank of Canada.

Following the IIROC review, IIROC published a report which noted differences between LIBOR and CDOR and also provided recommendations for the future of CDOR. The report's recommendations were in large part consistent with those published in the Wheatley Review. For example, IIROC stated that steps should be taken to strengthen the safeguards around the integrity of CDOR. Additionally, the report stated that market participants should continue to play a significant role in the production and oversight of CDOR. In contrast to the Wheatley Review, IIROC's report stated that it would not be appropriate for CDOR rates to be based on transactional evidence.

5. CDOR in Common Use

Credit agreements using CDOR as a loan pricing benchmark will typically refer to the yield rates for Canadian Dollar BAs, for a specified term, that are listed on the Reuters Screen CDOR Page as of 10:30 am (Toronto time) on the applicable quotation day. The Reuter Screen CDOR Page is the display on the Reuters Monitor Money Rates Service for the purpose of displaying bid quotations for BAs, accepted by banks participating in the daily CDOR survey. If the quotation day is not a banking day, the CDOR rate will be the rate that appears on the Reuters Screen CDOR Page on the next preceding banking day.

Should CDOR not be available on the Reuters Screen CDOR Page on the applicable quotation day, credit agreements often contemplate various fallback methods for determining CDOR. One such method is the use of average discount rates applicable to Canadian Dollar BAs, as quoted by one or more reference banks. In the event that reference banks are unwilling or unable to quote, lenders may consider what other options are available to address the issue.

Some credit agreements may also state that CDOR may be determined from the rate quoted on the Bloomberg CDOR Page for the applicable quotation day. If used as a fallback method, this way of determining CDOR is problematic as Reuters calculates CDOR, while Bloomberg lists CDOR. Accordingly, it is difficult to foresee a situation where Bloomberg could list CDOR in the absence of a Reuters listing.

Notably, Canadian Dollar LIBOR cannot be used as a substitute for CDOR as the British Bankers' Association ("BBA") ceased quoting LIBOR in certain thinly-traded currencies, including Canadian Dollars, effective May 31, 2013. The BBA made this decision following the conclusions of the Wheatley Review that these benchmarks were difficult to support using actual trade data and were not heavily used by market participants.

6. Future of CDOR

The BBA's decision to cease quoting LIBOR has had the consequence of drawing additional international attention to the use of CDOR as a commercially-accepted benchmark for pricing Canadian Dollar obligations. For instance, the UK-based Association of Corporate Treasurers has noted CDOR as a possible alternative to Canadian Dollar LIBOR.

With the increasing international focus on the use of CDOR as a benchmark it is perhaps not surprising that CDOR has drawn the attention of Canadian regulators.

Although OSFI's framework has yet to be published, OSFI has stated that the framework can be expected to be "informed, inter alia, by new international expectations and developments, and adapted to the unique characteristics of CDOR". Additionally, OSFI's expectations of reporting participants will be "principles-based and focused on their internal benchmark submission activities 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.

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.

© McMillan LLP 2014

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Shahen A. Mirakian
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions