EXCLUSION OF THE NEW 30Y BOND FROM THE 30-YEAR GOVERNMENT OF CANADA BOND FUTURES JUNE 2023 DELIVERY BASKET

In relation to Circular 025-23, Bourse de Montréal Inc. (the "Bourse") wishes to inform market participants that it will exclude the newly issued 30Y Government of Canada ("GoC") bond from the 30-Year GoC Bond Futures ("LGB") June 2023 delivery basket, even if this bond might eventually satisfy the delivery standards for this contract expiry.

Specifically, the 2.75% December 2055 GoC bond (the "Bond") will not be included in the list of deliverable bonds published by the Bourse on a monthly basis for the LGB June 2023 expiry, notwithstanding that all the eligibility criteria of the LGB June 2023 delivery basket are met in the coming months.

As per article 12.412 (f) of the rules of the Bourse and Section C-1802 of the rules of Canadian Derivatives Clearing Corporation ("CDCC"), the Bourse shall have the right to exclude any GoC bond from delivery status.

The Bourse has decided to preemptively exclude the Bond from this contract expiry given the development stage of the product and the potential impact of the Bond on the LGB June 2023 contract market dynamic. With this decision, the Bourse aims to eliminate the uncertainty associated with the June 2023 deliverable basket and cheapest-to-deliver bond ahead of the March/June roll period for bond futures. This solution was reached after consultation with market practitioners in the interest of the product's initial growth and to ensure a smooth transition following the recent specification change to the LGB delivery period.

As a result, the table below reflects the effective deliverable basket for the LGB June 2023 contract:

^{First issued by the Bank of Canada on Jan 30, 2023, in a size of $1.5B.}

Considering the unusual nature of the circumstances surrounding the Bond, in the Bourse's view this situation is sufficiently exceptional to warrant such an intervention. For further clarification, this decision only applies to the LGB June 2023 contract and not to further LGB contract expiries.

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