Template:Differences between repo and sell buyback
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-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
- Netting is less certain.
- Documented sell/buyback]]s: There are operational differences between repos and documented sell backs:
- Differences in the margining process
- What happens when income is paid on collateral.