On September 8, 2026, a trial period commenced for Canada’s first formal fail fee framework for Government of Canada (GoC) bonds and T-bills—a structural change that could reshape settlement behaviour across the market. This new framework introduces a hybrid fee structure with a permanent 50 basis-point floor and a dynamic component that can rise to 150 basis points when fails become elevated and persistent.
If implemented following the trial, it would be the first fail regime introduced in Canada. The framework—first proposed in 2022, finalized in January 2024 and now in an 18-month trial period through CDS Clearing and Depository Services Inc.—will see fails and associated fees calculated but not charged or disbursed during this phase.
Below, we provide background on the objectives of this initiative and what to expect in the months ahead.
The framework at a glance
The fail fee framework was developed by the Government of Canada Market Functioning Steering Group (GMF), a body established by the Canadian Fixed-Income Forum (CFIF) in January 2020 to address GoC market functioning in a low-rate environment. The GMF’s mandate was to study mechanisms that provide financial incentives for timely settlement of GoC trades, and the fail fee is the central output of that work. Following a public consultation in late 2022 and subsequent industry outreach, the final framework was published in January 2024 alongside a summary of submissions and updated Q&As. The framework applies to Canadian-dollar-denominated GoC bonds and T-bills.
The fail fee applies to delivery-versus-payment (DvP) transactions settled through CDS—the primary trigger for chargeable fails. A chargeable fail occurs when the seller of GoC securities has not taken the necessary steps to ensure settlement by the applicable deadline and the transaction therefore fails. Fails in delivery-vs-delivery (DvD) or free-of-payment (FoP) transactions do not themselves incur the fee; but a fail in these transactions could cause a downstream fail in a DvP transaction, which would then trigger the fee.
Importantly, the framework is not a response to a fail problem in Canada. It’s a preventative measure designed to incentivize timely settlement and safeguard the functioning of the GoC market, particularly in environments where low interest rates reduce the natural cost of failing to deliver.
Prerequisites met, pilot ahead
The framework’s trial period was designed to begin only after two critical prerequisites were completed: the transition to T+1 securities settlement and the implementation of CDS’s post-trade modernization initiative. Both are now in the rearview mirror. Canada moved to T+1 settlement on May 27, 2024, one day ahead of the United States, with CDS’s post-trade modernization following suit on April 28, 2025.
With both prerequisites complete, fails and associated fail fees will be calculated but not charged or disbursed during the trial period. Fails statistics will be published on the CDS website, and CDS participants will have access to reports on failed transactions and the associated indicative fail fee invoices. Collateral Infrastructure and Market Practices Advisory Group (CIMPA) has also published an updated FAQ document about the trial period and the fail fee framework.
Any subsequent decision to activate fail fee payments—either as part of a second stage following the initial 18-month period or permanently—will be made by CFIF.
RBC Investor Services is an active participant in CIMPA. We are working through the trial period to optimize our systems and processes, ensuring that our clients will have visibility into their fail profiles and indicative fee calculations.
