During its tenure, CDOR has served the Canadian market well and avoided the scandals afflicting other global benchmarks during the 2008 financial crisis. Nonetheless, CDOR is showing its age, a perceived dinosaur in the rapidly changing global landscape for financial interest rate benchmarks.
At its core, CDOR is a survey-based benchmark, with a panel of six banks each morning contributing the rate at which they are willing to lend to corporate borrowers with existing committed BA credit facilities. While CDOR is an executable rate for corporate borrowers, the setting is, to varying degrees, based on expert judgment, as it cannot be directly tied to transparent market transactions. Transactions have become the preferred approach globally by regulators and increasingly entrenched in other credit-sensitive benchmarks.
Because its construct is no longer aligned with the…
