Insights from the LVTS overnight loan market: Implications for Lynx collateral

Payments Canada has released its latest discussion paper, Insights from the LVTS overnight loan market: Implications for Lynx collateral. With the move from LVTS to Lynx, the collateral requirements for participants changed materially. In order to assess the collateral policy and eligibility expansion associated with Lynx, this paper identifies a series of findings about the overnight loan market in LVTS including where and how overnight loans take place. This paper also provides an in-depth comparison between large and small participants’ activities in the overnight market based on their asset size and pair type in periods of normal activity and during times of broader economic stress (the financial crisis of 2008/2009 and the recent COVID-19 crisis).