Canadian Depository for Securities Limited (CDS)
What Is the Canadian Depository for Securities Limited (CDS)?
The Canadian Depository for Securities, Ltd. (CDS) is Canada's national securities depository, clearing, and settlement hub. It gives dependable and cost-effective depository, clearing, and settlement services for participants of Canada's equity, fixed income, and money markets.
The CDS is currently part of the TMX Group, a large Toronto-based financial services company that operates the Toronto Stock Exchange (TSX), TSX Venture Exchange, Montreal Exchange, and TSX Alpha Exchange.
Understanding the Canadian Depository for Securities Limited (CDS)
The Canadian Depository for Securities Limited (CDS) responsibilities incorporate the safe custody and movement of securities, post-trade transactions processing, accurate record-keeping, and the collection and distribution of securities entitlements like dividends and interest payments. The CDS is regulated by the securities commissions of Ontario and Quebec and the Bank of Canada.
The CDS incorporated in June 1970, in response to rising costs for back-office functions and increased trading volumes in Canadian capital markets. It took care of approximately 6,000 daily exchange trades in its first year.
Today, as a subsidiary of TMX Group, the CDS handles more than 1.6 million daily domestic and cross-border securities trades and custodies more than $4 trillion of securities. TMX Group operates exchanges across asset classes, including the Toronto and Montreal Exchanges. As the parent company has added capabilities through acquisition, the CDS has stayed the primary provider of equities and fixed income clearing and trade settlement services.
The CDS has steadily increased its range, initially in Canadian markets and later in the U.S. The firm started clearing equity trades on the Montreal Exchange in 1976 and expanded to the Toronto Exchange in 1977. The CDS started working with U.S. clearing and custody firm The Depository Trust Company in 1979 to foster access to U.S. capital markets. Cross-border clearing and settlement of U.S. securities started in 1998. The CDS implemented a clearing system for Canadian bonds and money market instruments in the mid 1990s.
The CDS and Capital Market Improvements
The CDS gave the trading infrastructure and technology that empowered the Canadian Capital Markets Association (CCMA) to implement its T+2 initiative in 2017 that shortened trade settlements of investment funds, equities, and bonds from three to two business days. The move was made in conjunction with a comparative T+2 settlement mandate directed in the U.S. by the Securities and Exchange Commission.
In its report, the CCMA noted the close ties that exist between Canadian and U.S. capital markets. Shortening the settlement cycle all the more closely adjusted the two primary North American markets with European markets previously settling on a T+2 basis. The move likewise intended to reduce credit and market risk, including the risk of a trading counterparty defaulting, and work on capital proficiency.
Highlights
- The CDS was shaped to streamline administrative center processing of Canadian securities utilizing new technologies and automation to create faster, more efficient systems.
- The Canadian Depository for Securities Limited (CDS) is a centralized depository service and electronic clearing and settlement system utilized in Canada.
- The CDS gave the trading infrastructure and technology that empowered the Canadian Capital Markets Association (CCMA) to implement its T+2 initiative in 2017 that shortened trade settlements of investment funds, equities, and bonds from three to two business days.
- In 2012, CDS turned out to be part of the Toronto Stock Exchange's TMX Group.
