BoC plans changes to foreign exchange rate data

Among other things, the central bank is planning to introduce a new FX rate calculation methodology, reduce the number of currencies that it publishes data on, and it will publish rates just once at the end of the day.

The changes reinforce the distinction between FX rate fixings used as benchmarks for transactions and the exchange rates that it publishes for informational purposes, the BoC notice says.

The changes “are being undertaken in the context of broader international official sector work on the design of foreign exchange reference rates, the notice says, and they take into account the ongoing international work on financial benchmarks, including recommendations from the Financial Stability Board (FSB) and the International Organization of Securities Commissions (IOSCO).

The bank’s new methodology will aim to reflect the average exchange rate throughout the business day, rather than at a single point in time. It will no longer publish two sets of exchange rates (noon and closing). Instead, the bank will publish a single rate per currency pair each day at 16:30 ET. As well, the BoC will only publish rates on 25 currencies, which the bank says represents the “vast majority of foreign exchange transactions conducted against the Canadian dollar”. The new methodology will be published in the fourth quarter, as will the list of currencies, which will be adjusted every three years.

The bank says that it is announcing the changes now to allow ample time for users to make any adjustments. The reforms follow a broad public consultation.