DEFINITION of Noon Rate
The noon rate was a term used by the Bank of Canada (BOC) to describe the publication of a specific foreign exchange rate between the U.S. dollar and the Canadian dollar (CAD). The rate was released by 12:45 p.m. by the Bank of Canada on a daily basis, and was based on CAD trading taking place from 11:59 a.m. to 12:01 p.m. on that day. The BOC also published a closing rate at 4:00 p.m. Effective 17 March 2017, the BOC abolished both these and changed to publishing a single indicative daily rate per CAD currency pair.
BREAKING DOWN Noon Rate
The noon rate had been widely used as a benchmark exchange rate by companies and others needing to make foreign exchange calculations. The changeover to the single indicative rate had however been telegraphed well in advance — the BOC had announced in February 2016 that it would be changing its exchange rate publication methodology. The new rate reflects a broad daily average rather than the point-in-time value of the noon rate, and is published at 4:30 p.m. daily.
The change in methodology was partly spurred by the results of a 2014 BOC survey (which elicited almost 17,000 responses) as well as other broad public consultation, and also took into account broader ongoing international research into financial benchmarks. The 2014 survey had indicated that while there was widespread use of the benchmark, this was not methodology-dependent and users would be able to adjust their processes to a new methodology. The BOC also noted that financial markets were much less transparent when it had begun publishing the noon and closing rates; real-time exchange rates are now widely available to both market participants and the public, lessening the need to publish time-specific rates.