Unlike CDOR, which has a term component for setting interest rates, CORRA is backward-looking; therefore, systems, models and curves are required to calculate compounded interest in arrears. In Canada, CARR has formally announced the development of an IOSCO-compliant term CORRA benchmark (“Term CORRA”) to be published from Q3 2023 onwards. The use of Term CORRA will be restricted, through a licensing agreement, to lending products, trade finance (i.e., the discounting of receivables), and single currency derivatives for end-users hedging Term CORRA based loans. The long-term viability of Term CORRA will depend on the liquidity of the underlying 1- and 3-month CORRA futures contracts being sufficiently robust to meet regulatory expectations. Therefore, any products referencing Term CORRA are expected to include robust fallbacks; in most cases to overnight CORRA calculated in-arrears. CARR published an overview for the methodology of CORRA compounded-in-arrears in November 2021, which can be found here.
As of July 4th, 2023, a beta version of Term CORRA was released, available on the CanDeal website. These rates are a beta version of Term CORRA which are undergoing final testing. CanDeal Benchmark Solutions and TMX Datalinx have announced that the final version of Term CORRA will officially launch on September 5, 2023.
For more information regarding Term CORRA, please consult CARR’s announcement here and for CARR’s approved use cases here.