Say goodbye to the Bank of Canada’s noon exchange rate: say hello to indicative rate

Hold your groans, but the sun has set on the noon exchange rate published by the Bank of Canada.

The rate, which has been around for more than a decade and which was used in the calculation of all sorts of foreign contracts, has disappeared.

But the bank — which had been publishing the rate, as well as the closing rate — gave all potential users, sufficient time to adjust. In Feb. 2016, the bank announced it would be making “a series of changes to the number, frequency and calculation methodology of its published foreign exchange rates.”

The changeover was effective March 1 2017. And instead of the noon rate — the bank also published the closing rate — the central bank opted to publish a single indicative rate per currency pair. And the bank publishes on 26 currency pairs.

That new rate — which “broadly reflects the average exchange rate observable throughout the Canadian business day, rather than at a single point in time” — was to be published at 4:30 p.m. The decision was made, in part, as a result of a survey undertaken in 2014.

While there was lots of time for the affected parties to make the required changes, the Bank opted to give users a little more. A Bank of Canada spokesperson said both rates (the noon rate and the indicative rate) were published from March 1 but as of May 1, only the indicative rate is to be published. On its website the Bank has explained the methodology behind calculating the new indicative rate.

And different institutions, in the mutual fund area, adopted different approaches: some implemented the change on March 1 while others waited until earlier this week before changing.

The key question is the effect of the change to the indicative rate. The short answer is probably not very much because currencies generally tend not to vary significantly between noontime and the end of the day.

Currencies — unlike stocks, which tend to stop trading when the local market closes for the day — trade on a 24-hour a day basis. The other reality is that despite the proliferation of other sources of exchange rate information, the Bank decided it was in the public interest to keep publishing because of their use by “the general public and by public and private sector institutions, for a variety of purposes.”

Walton CCAA

Tucked away in the material for the application for CCAA protection by Calgary-based Walton International Group is a chart detailing the group’s revenue woes.

And that chart shows how tough business has become over the past few years. In 2016, “annual sales volume” was $19.68 million. In 2012 the comparable number was $134.54 million. Between those bookends: $117.19 million (2013); 53.80 million (2014); 53.01 million (2015.) Those revenue declines were sufficient to mean that Walton posted a $67.3 million loss over the past three years.

Clearly Walton’s business — which includes investing in land in North America financed largely by selling pieces to investors — has been affected by the economic slowdown, particularly that generated by oil and housing issues in Alberta.

Before that Walton was everywhere: According to the affidavit given by William Doherty, Walton’s chief executive, it operates through 186 direct and indirect Canadian subsidiaries. Those entities, one of which was an exempt market dealer, were developing projects, raising external capital (by selling secured and unsecured loans) and collecting fees in the process. Clearly a rising tide was raising all boats.

Financial Post