The Launch of the CanPX Transparency System

The Launch of the CanPX Transparency System
by Ian Russell

After nearly ten years of continuous effort, the CanPX bond transparency system is on the verge of being offered to the investing public. CanPX will start off providing real time bid and offer quotations, in price and yield terms, and traded price/yield and volume information, for about fifteen benchmark Canada and provincial bonds, and the three-month, six-month and one-year Canada treasury bills. The information will be drawn from the interdealer brokers intermediating between the dealer market-makers, and will be sorted in real time for the best bid and offered, and traded prices in the wholesale bond market. More bond and treasury bill issues will be quickly added to the system during the four month trial period -- filling out real time information to include benchmark and "off-the-run" bond and treasury bill issues right across the yield curve.

CanPX will, as a first step, bring more visibility to the over-the-counter markets, providing investors with an effective benchmark--the wholesale price or yield--to measure prices offered to and transacted with investors. Retail and institutional investors will apply respective spreads over the wholesale prices. These standard spreads will boost confidence among investors that they are getting a fair shake and lead to increased trading activity. International investors further removed from domestic market activity than Canadian institutions will be key beneficiaries, as will smaller domestic institutions. Retail investors will have improved access to information through both their brokers and directly through the Internet.

The availability of real time composite prices through the CanPX system could also act as an important catalyst in moving markets towards automated execution of debt transactions, something overdue in Canadian debt markets given tight margins and falling volumes.

Ian Russell is senior vice-president of capital markets, Investment Dealers Association in Toronto.
Transcontinental Media G.P.