Template:Differences between repo and sell buyback: Difference between revisions
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====The Jolly Contrarian’s explanation==== | ====The Jolly Contrarian’s explanation==== | ||
Unless you have a taste for {{tag|paradox}} (and who, in our shadow-flecked modern world doesn’t?) there’s ''no'' difference between a [[repo]] and a [[sell/buy-back]], and even seasoned industry professionals get fidgety and make their excuses to pop off to the bathroom if you ask them to give one. To the sentiment that [[buy/sell-back]]s are undocumented, the lie is somewhat given to that by the fact that the {{gmra}} expressly incoporates the {{gmraprov|Buy/Sell Back Transaction}} as a defined term ''with its own freaking Annex'', meticulously negotiated into the master by [[negotiator]]s the world over. | |||
Revision as of 14:02, 3 December 2018
Difference between Repurchase Transaction and a Buy/Sell Back Transaction
The official explanation
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.
- Documented sell/buy-backs: There are operational differences between repos and documented sell backs:
- Differences in the margining process
- What happens when income is paid on collateral.
The Jolly Contrarian’s explanation
Unless you have a taste for paradox (and who, in our shadow-flecked modern world doesn’t?) there’s no difference between a repo and a sell/buy-back, and even seasoned industry professionals get fidgety and make their excuses to pop off to the bathroom if you ask them to give one. To the sentiment that buy/sell-backs are undocumented, the lie is somewhat given to that by the fact that the Global Master Repurchase Agreement expressly incoporates the Buy/Sell Back Transaction as a defined term with its own freaking Annex, meticulously negotiated into the master by negotiators the world over.