Lynx: New High-Value Payments By-law

Summary#

The government approved Canadian Payments Association By-law No. 9 — Lynx, the legal rulebook for a new high-value payments system run by Payments Canada. Lynx replaces the old Large Value Transfer System (LVTS) and starts operating on August 28, 2021 (with a few related changes coming into force on June 1, 2022).

What it does#

• Creates the legal framework for Lynx, a new real-time gross settlement system for large or time-sensitive payments.
• Changes how payments settle: each payment is settled immediately when sent, instead of being netted at the end of the day (the LVTS model).
• Sets rules on who can join Lynx and how participants connect, pledge collateral, and get intraday loans and overnight advances from the Bank of Canada.
• Defines how payment messages are sent, queued, rejected, or finalized, and requires receiving banks to make funds available to payees by the end of the payments processing cycle (about 7:00 p.m. Eastern).
• Allows Payments Canada and the Bank of Canada to take emergency actions if Lynx or a participant has operational problems.
• Includes changes to other Payments Canada by‑laws so Lynx can operate and the LVTS can be kept temporarily as a backup during transition.

Who's affected#

• Banks and other financial institutions that are members of Payments Canada and that handle large-value payments. (Payments Canada expects about 16 direct Lynx participants.)
• The Bank of Canada, which provides intraday loans, overnight advances, and oversight interaction.
• Businesses and consumers who receive or send very large or time-sensitive payments will be affected indirectly because settlement timing and risk rules change.
• It does not directly affect small businesses or taxpayers; the system is run by Payments Canada and funded by its members.

Why it matters#

• Lynx reduces systemic risk by settling each payment only when funds are available. This moves risk from a shared end-of-day model to a pre-funded, defaulter-pays approach.
• The system underpins major business and financial activity: the old LVTS handled over 41,000 transactions per business day (about $398 billion daily, nearly $101 trillion over a year), so changes affect how big payments clear in Canada.
• Financial institutions face an industry implementation cost estimated at $85 million, shared across participants, to move from LVTS to Lynx.
• For payees, settled payments are final and irrevocable once processed in Lynx, and funds must be made available promptly, improving payment certainty.
• Keeping LVTS as a temporary backup during transition reduces the risk of service interruption while Lynx is adopted.