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Template:Differences between repo and sell buyback (view source)
Revision as of 10:12, 3 December 2018
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Amwelladmin (talk | contribs) (Created page with "===Difference between {{gmraprov|Repurchase Transaction}} and a {{gmraprov|Buy/Sell Back Transaction}}=== According to ICMA’s helpful website<ref>[https://www.icmagroup.org/...") |
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===Difference between {{gmraprov|Repurchase Transaction}} and a {{gmraprov|Buy/Sell Back Transaction}}=== | ===Difference between {{gmraprov|Repurchase Transaction}} and a {{gmraprov|Buy/Sell Back Transaction}}=== | ||
According to | According to [[ICMA]]’s helpful website<ref>[https://www.icmagroup.org/Regulatory-Policy-and-Market-Practice/repo-and-collateral-markets/icma-ercc-publications/frequently-asked-questions-on-repo/8-what-is-the-difference-between-a-repurchase-agreement-and-a-sell-buy-back/ You can find ICMA’s FAQ here]</ref> economically, [[repo]]s and [[sell/buy-back]]s both behave like [[secured loan]]s; 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: | *'''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 | **The parties cannot call margin on each other for market movements between the transactions | ||
**Netting is less certain. | **Netting is less certain. | ||
*'''Documented sell/ | *'''Documented [[sell/buy-back]]s''': There are operational differences between repos and documented sell backs: | ||
**Differences in the | **Differences in the [[margin]]ing process | ||
**What happens when income is paid on collateral. | **What happens when {{gmraprov|income}} is paid on {{gmraprov|collateral}}. | ||