Template:Differences between repo and sell buyback: Difference between revisions

From The Jolly Contrarian
Jump to navigation Jump to search
Newer edit →
VisualWikitext
Created page with "===Difference between {{gmraprov|Repurchase Transaction}} and a {{gmraprov|Buy/Sell Back Transaction}}=== According to ICMA’s helpful website<ref>[https://www.icmagroup.org/..."
 
No edit summary
Line 1: Line 1:
===Difference between {{gmraprov|Repurchase Transaction}} and a {{gmraprov|Buy/Sell Back Transaction}}===
===Difference between {{gmraprov|Repurchase Transaction}} and a {{gmraprov|Buy/Sell Back Transaction}}===
According to ICMA’s helpful website<ref>[https://www.icmagroup.org/Regulatory-Policy-and-Market-Practice/repo-and-collateral-markets/icma-ercc-publications/frequently-asked-questions-on-repo/8-what-is-the-difference-between-a-repurchase-agreement-and-a-sell-buy-back/ You can find ICMA’s FAQ here</ref> economically, [[repo]]s and [[sell/buy-back]]s both behave like [[secured loan]]s; legally both amount to a sale and later repurchase of securities. A [[repurchase agreement]] is always a written contract; a [[sell/buy-back]] need not be.  
According to [[ICMA]]’s helpful website<ref>[https://www.icmagroup.org/Regulatory-Policy-and-Market-Practice/repo-and-collateral-markets/icma-ercc-publications/frequently-asked-questions-on-repo/8-what-is-the-difference-between-a-repurchase-agreement-and-a-sell-buy-back/ You can find ICMA’s FAQ here]</ref> economically, [[repo]]s and [[sell/buy-back]]s both behave like [[secured loan]]s; legally both amount to a sale and later repurchase of securities. A [[repurchase agreement]] is always a written contract; a [[sell/buy-back]] need not be.  


*'''Undocumented sell/buy-back]]s''': The sale and repurchase legs of an undocumented sell/buy-back are considered as separate contracts. Since there is no contract between times:
*'''Undocumented [[sell/buy-back]]s''': The sale and repurchase legs of an undocumented sell/buy-back are considered as separate contracts. Since there is no contract between times:
**The parties cannot call margin on each other for market movements between the transactions
**The parties cannot call margin on each other for market movements between the transactions
**Netting is less certain.
**Netting is less certain.


*'''Documented sell/buyback]]s''': There are operational differences between repos and documented sell backs:
*'''Documented [[sell/buy-back]]s''': There are operational differences between repos and documented sell backs:
**Differences in the margining process  
**Differences in the [[margin]]ing process  
**What happens when income is paid on collateral.
**What happens when {{gmraprov|income}} is paid on {{gmraprov|collateral}}.

Revision as of 10:12, 3 December 2018

Difference between Repurchase Transaction and a Buy/Sell Back Transaction

According to ICMA’s helpful website[1] economically, repos and sell/buy-backs both behave like secured loans; legally both amount to a sale and later repurchase of securities. A repurchase agreement is always a written contract; a sell/buy-back need not be.

  • Undocumented sell/buy-backs: The sale and repurchase legs of an undocumented sell/buy-back are considered as separate contracts. Since there is no contract between times:
    • The parties cannot call margin on each other for market movements between the transactions
    • Netting is less certain.
  1. ↑ You can find ICMA’s FAQ here
Retrieved from "https://jollycontrarian.com/index.php?title=Template:Differences_between_repo_and_sell_buyback&oldid=26895"