Payments Canada Begins Consultation On Policy Framework For High-Value Payments

Author:TechLex Blog and Conrad Lee
Profession:McCarthy Tétrault LLP
 
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On October 9, 2019, Payments Canada released a request for feedback on policy proposals for its Lynx Policy Framework. Lynx is the new high-value payments system that Payments Canada is developing to replace Canada's current Large Value Transfer System (LVTS). The purpose of the Lynx Policy Framework and consultation is to inform the drafting of the by-law that will provide the legal foundation for the Lynx system. The deadline for consultation submissions is November 15, 2019.

What is Lynx?

Lynx is the system that is scheduled to replace the current LVTS in as part of Payments Canada's broader modernization program. The goals of the Lynx implementation are to:

Facilitate secure payment transfers between Payments Canada and member financial institutions; Ensure compliance with the Bank of Canada's Risk-Management Standards for Designated Financial Market Infrastructures as a Real-Time Gross Settlement System (RTGS); Support Canada's current needs and be adaptable to future changes in technology and business processes in an effective manner; and Provide a safe and secure foundation that supports a dynamic payments environment. Lynx Policy Framework

The Lynx Policy Framework sets out several positions for discussion including:

Access

Lynx and other critical financial market infrastructures are required by the Bank of Canada to have "objective, risk-based and publicly disclosed criteria for participation, which permit fair and open access". Payments Canada has proposed that all Payments Canada members be eligible for Lynx participation provided they have completed the necessary application procedures.

The Lynx Policy Framework proposes no eligibility restrictions on affiliates of members becoming Lynx participants in their own right, as long as the affiliate possesses a separate settlement account and loan facility with the Bank of Canada and complies with Payments Canada's operational, business continuity, risk-related obligations, including the requirements for individualized connections to the CPA Services Network (CSN) and the Society for Worldwide Interbank Telecommunication (SWIFT).

Non-members of Payments Canada will not be eligible to be Lynx participants on the basis of the Canadian Payments Act. Payments Canada can only enforce compliance for member institutions and therefore, only these entities will be eligible to become Lynx participants.

Finality

The finality of a payment is currently governed by sections 43-51 of By-law No...

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