While there are costs to participate in CDCS, the benefits are substantial, and they are reaped in both normal times and in times of stress. Not only will the Canadian financial system benefit from more repos being centrally cleared, but both current and future participants will benefit from increased netting efficiencies and reduced counterparty credit risk.
These benefits will be further enhanced as the industry develops a generalized collateral repo product, in which any security in a predetermined basket of instruments can serve as collateral. This product should increase the liquidity and efficiency of the Canadian repo market.