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Lynx

Lynx is Canada’s high-value payment system (HVPS) operated by Payments Canada. It launched in September 2021, replacing the older Large Value Transfer System (LVTS), and is Canada’s primary platform for the secure and irrevocable settlement of large-value, time-critical, and systemically important payments. Lynx uses a real-time gross settlement (RTGS) model, aligning Canada with international best practices for financial market infrastructures.

Lynx is regulated by the Bank of Canada as a systemically important payment system (SIPS) due to its critical role in maintaining financial stability.
 

Core Function
Lynx enables Canadian financial institutions to transfer large sums of money securely and with immediate finality. Payments settled through Lynx are typically interbank transfers, corporate treasury payments, securities settlement obligations, and government-related disbursements.

Unlike LVTS (which used a net settlement model with loss-sharing arrangements), Lynx settles each payment on a gross basis in central bank money, eliminating credit risk between participants.
 

How Lynx Works

  1. Payment Initiation – A participant bank initiates a high-value payment through its connection to Lynx.

  2. Validation & Queuing – Payments are validated for format, compliance, and sufficient liquidity. If liquidity is insufficient, the payment is queued.

  3. Settlement – Once liquidity is available, Lynx debits the sender’s settlement account at the Bank of Canada and credits the receiver’s account.

  4. Finality – Settlement is immediate, final, and irrevocable, providing certainty for critical transactions.
     

Key Features

  • RTGS Settlement: Payments are processed individually in real time, not netted.

  • Central Bank Money: Eliminates settlement and credit risk between participants.

  • Resiliency & Security: Built with modern cybersecurity and operational resilience standards.

  • International Standards: Complies with CPMI-IOSCO Principles for Financial Market Infrastructures (PFMI).

  • ISO 20022 Messaging: From launch, Lynx adopted ISO 20022, enabling richer payment data, better compliance screening, and improved reconciliation.

  • Scalability: Designed to support future innovations like real-time retail payments and cross-border interoperability.
     

Participants
Participation in Lynx is restricted to direct participants, which are primarily:

  • Major Canadian banks.

  • Domestic subsidiaries of foreign banks.

  • The Bank of Canada.
    Other financial institutions access Lynx indirectly through correspondent relationships with direct participants.
     

Use Cases

  • Interbank Settlements: Transfers between banks for liquidity and clearing obligations.

  • Corporate Payments: High-value treasury or investment-related payments.

  • Government Transactions: Tax receipts, benefit disbursements, and federal/provincial fund transfers.

  • Securities & Market Infrastructure: Payments related to securities settlement through CDS (Canadian Depository for Securities) and other financial market infrastructures.

  • International Payments: Settlement of cross-border transactions routed through SWIFT and Canadian participants.
     

Benefits

  • Risk Reduction: Eliminates credit and systemic risk by settling in central bank money.

  • Global Alignment: Brings Canada in line with RTGS systems like Fedwire (U.S.), TARGET2/T2 (EU), and CHAPS (UK).

  • Richer Data: ISO 20022 improves transparency, fraud detection, and automation of back-office processes.

  • Financial Stability: Provides certainty and resiliency for Canada’s most important payments.

  • Future-Proofing: Designed to support cross-border instant payments and fintech innovation.
     

Risks & Considerations

  • Liquidity Demands: RTGS requires participants to maintain higher intraday liquidity than net settlement systems.

  • Operational Costs: More complex infrastructure compared to LVTS, requiring investment by participants.

  • Cybersecurity Threats: As a critical national infrastructure, Lynx is a target for cyberattacks, necessitating strong controls.

  • Cut-off Times: Unlike 24/7 real-time payment systems (e.g., UPI, FedNow), Lynx operates within designated hours on business days.
     

Recent Developments & Future Outlook

  • ISO 20022 Migration: Lynx is among the first global HVPS to launch natively on ISO 20022. This positions Canada to interoperate more easily with other modernized systems.

  • Cross-Border Collaboration: Payments Canada is working with SWIFT and global central banks to enhance cross-border payment efficiency.

  • Integration with Real-Time Rail (RTR): Lynx handles high-value payments, while the upcoming RTR system (expected to launch in coming years) will handle retail instant payments in Canada.

  • Ongoing Enhancements: Focus on liquidity-saving mechanisms, expanded functionality, and compliance with evolving regulatory expectations.
     

Comparison with Other Systems

  • Lynx vs. LVTS: LVTS was deferred net settlement with risk-sharing; Lynx is RTGS with settlement finality in central bank money.

  • Lynx vs. Fedwire (U.S.): Both are RTGS systems for high-value payments; Fedwire is older but migrating to ISO 20022 in line with Lynx.

  • Lynx vs. ACH (U.S.) or EFT (Canada): ACH/EFT are batch-based, lower-value systems; Lynx is real-time and high-value.

  • Lynx vs. RTR (Canada): Lynx serves wholesale high-value payments; RTR will serve retail, everyday transactions in real time.

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