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2000 Global Master Repurchase Agreement
A Jolly Contrarian owner’s manual™
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Paragraph 3 in a Nutshell™
Use at your own risk, campers!
3. Initiation; Confirmation; Termination
- 3(a) Means of execution: The parties may enter into Transaction orally or in writing, at either party’s initiative.
- 3(b) Confirmation: Upon agreeing a Transaction, the parties must agree a written “Confirmation” describing the Purchased Securities (including unique identifiers), identifying who is Buyer and who is Seller, and setting out
- (i) the Purchase Date;
- (ii) the Purchase Price;
- (iii) the Repurchase Date (or that the Transaction may be terminated on demand, where that is the case);
- (iv) the Pricing Rate;
- (v) account details for Transaction payments;
- (vi) whether the Transaction is a Repurchase Transaction or a Buy/Sell Back Transaction (if there is a Buy/Sell Back Annex);
- (vii) whether the Transaction is an Agency Transaction and, if it is, which party is agent and what is the name or identifier of the Principal (if there is an Agency Annex); and
- (viii) any additional terms;
- The Confirmation, with this Agreement, evidences the agreed terms for the Transaction, unless a party objects to it promptly after receipt. If the Confirmation and this Agreement conflict, the Confirmation will prevail for the Transaction only.
- 3(c) Initial settlement: On the Purchase Date, Seller must transfer the Purchased Securities to Buyer against payment of the Purchase Price.
- 3(d) Transaction termination: Demand Transactions will terminate on the date specified for Termination in the demand. Term Transactions will terminate on the agreed Termination date.
- 3(e) Demand terminations: Demands to terminate demand Transactions, may be made by by telephone or otherwise, but must allow for at least the standard settlement period for the relevant cash or Equivalent Securities.
- 3(f) Termination settlement: On the Repurchase Date, Buyer must transfer Equivalent Securities to Seller against payment of the Repurchase Price (less any amount due but unpaid by Buyer to Seller under paragraph 5).
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Full text of Paragraph 3
3. Initiation; Confirmation; Termination
- 3(a) A Transaction may be entered into orally or in writing at the initiation of either Buyer or Seller.
- 3(b) Upon agreeing to enter into a Transaction hereunder Buyer or Seller (or both), as shall have been agreed, shall promptly deliver to the other party written Confirmation of such Transaction (a “Confirmation”).
- The Confirmation shall describe the Purchased Securities (including CUSIP or ISIN or other identifying number or numbers, if any), identify Buyer and Seller and set forth
- (i) the Purchase Date;
- (ii) the Purchase Price;
- (iii) the Repurchase Date, unless the Transaction is to be terminable on demand (in which case the Confirmation shall state that it is terminable on demand);
- (iv) the Pricing Rate applicable to the Transaction;
- (v) in respect of each party the details of the bank account[s] to which payments to be made hereunder are to be credited;
- (vi) where the Buy/Sell Back Annex applies, whether the Transaction is a Repurchase Transaction or a Buy/Sell Back Transaction;
- (vii) where the Agency Annex applies, whether the Transaction is an Agency Transaction and, if so, the identity of the party which is acting as agent and the name, code or identifier of the Principal; and
- (viii) any additional terms or conditions of the Transaction;
- and may be in the form of Annex II hereto or may be in any other form to which the parties agree. The Confirmation relating to a Transaction shall, together with this Agreement, constitute prima facie evidence of the terms agreed between Buyer and Seller for that Transaction, unless objection is made with respect to the Confirmation promptly after receipt thereof. In the event of any conflict between the terms of such Confirmation and this Agreement, the Confirmation shall prevail in respect of that Transaction and those terms only.
- 3(c) On the Purchase Date for a Transaction, Seller shall transfer the Purchased Securities to Buyer or its agent against the payment of the Purchase Price by Buyer.
- 3(d) Termination of a Transaction will be effected, in the case of on demand Transactions, on the date specified for Termination in such demand, and, in the case of fixed term Transactions, on the date fixed for Termination.
- 3(e) In the case of on demand Transactions, demand for Termination shall be made by Buyer or Seller, by telephone or otherwise, and shall provide for Termination to occur after not less than the minimum period as is customarily required for the settlement or delivery of money or Equivalent Securities of the relevant kind.
- 3(f) On the Repurchase Date, Buyer shall transfer to Seller or its agent Equivalent Securities against the payment of the Repurchase Price by Seller (less any amount then payable and unpaid by Buyer to Seller pursuant to paragraph 5).
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Related agreements and comparisons
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Related agreements: Click here for the same clause in the 1996 MRA, when we get round to finding out the first thing about it.
Comparison: Template:Gmradiff 3
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Content and comparisons
Template:M comp disc GMRA 3
Summary
The engine room of the Global Master Repurchase Agreement. If you are arriving here from the land of ISDA Master Agreement you may be surprised at how blasé this all seems. But repo is the basic plumbing of the financial system, and there is little standing on ceremony — nor are the tenors or the exposures anything to get particularly wild about: while repo is not usually callable at will (as a stock loan typically is) the terms tend to be short — usually inside three months, and often as short as overnight.
The key terms are really straight forward: start date, finish date, who is “buying” and who is “selling”, and at what price. Note that while the Purchase Price is a matter of some conjecture and negotiation; the Repurchase Price is not: it is basically the Purchase Price plus a fee-loading that you determine by applying the Pricing Rate. Thus — this is axiomatic to the concept of a repo — the seller retains the price risk on the Purchased Securities throughout the trade. The buyer is really only financing the seller’s inventory. Economically, this is little different from a secured loan collateralised by title transfer of bonds, but — for reasons we don’t in all honesty understand, since the financial treatment ought to be the same, at least as long as the Repurchase Price is fixed to the Purchase Price and the Buyer therefore doesn’t really take risk to the Purchased Securities, and nor would the Seller get them off its balance sheet.
General discussion
Template:M gen GMRA 3
See also
References