The Bank of Canada has announced the details of a new liquidity facility that will be available to firms other than primary dealers.

On October 14 the Bank of Canada announced today that it will enter into a 14-day term purchase and resale agreement facility for private sector money market instruments. Eligible bidders include both primary dealers and indirect bidders consisting of institutions “which can demonstrate significant activity in the Canadian dollar wholesale money markets and which are subject to federal or provincial regulation.”

Today, the Bank said that firms seeking to participate in the auction as an indirect bidder are asked to complete an application form and, if the application is accepted, to have agreed with and signed the PRA agreement with the Bank of Canada two business days prior to the operation.

The $1 billion auction is take place on October 27. The minimum bid rate will be announced on the Bank’s web site ahead of the auction. It will be calculated as a spread of 75 bps over the average of the Bank of Canada’s overnight rate target and the 1-month OIS rate at 9:00 (ET) on the day of the auction.

The auction will be held at 9:30 and the results of these operations will be announced on the Bank’s web site at 10:30. Primary dealers must notify the Bank of Canada of the securities that will be used in the transactions, both by themselves and by their indirect bidders, by 12:00 on the day of the auction.

The eligible securities for these transactions will consist of Canadian-dollar denominated bankers’ acceptances and promissory notes; commercial paper, including that of foreign issuers; and asset-backed commercial paper of eligible programs, with at least two credit ratings. Securities issued by the bidder (or any related party) cannot be used as collateral by the same bidder, with the exception of bank-sponsored ABCP meeting the Bank of Canada’s criteria.

The Bank will continue to provide additional term liquidity as long as conditions in financial markets warrant, it noted.