Template:Differences between repo and sell buyback

Difference between Repurchase Transaction and a Buy/Sell Back Transaction

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.