Template:Differences between repo and sell buyback

Difference between Repurchase Transaction and a Buy/Sell Back Transaction

The official explanation

According to ICMA’s helpful website 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.