Transaction - GMRA Provision

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GMRA Anatomy


In a Nutshell Clause 1(b):

1(b)Transactions” may be “Repurchase Transactions” or “Buy/Sell Back Transactions” and will be governed by this Agreement and Annex I.
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Global Master Repurchase Agreement full text of Clause 1(b):

1(b) Each such transaction (which may be a repurchase transaction (“Repurchase Transaction”) or a buy and sell back transaction (“Buy/Sell Back Transaction”) shall be referred to herein as a “Transaction” and shall be governed by this Agreement, including any supplemental terms or conditions contained in Annex I hereto, unless otherwise agreed in writing.
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There are two types of Transaction under a Global Master Repurchase Agreement: a Repurchase Transaction and a Buy/Sell Back Transaction.

Difference between Repurchase Transaction and a Buy/Sell Back Transaction

The official explanation

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-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.

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.

References