Transaction - GMRA Provision: Difference between revisions
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There are two types of {{gmraprov|Transaction}} under a {{gmra}}: a {{gmraprov|Repurchase Transaction}} and a {{gmraprov|Buy/Sell Back Transaction}}. | There are two types of {{gmraprov|Transaction}} under a {{gmra}}: a {{gmraprov|Repurchase Transaction}} and a {{gmraprov|Buy/Sell Back Transaction}}. | ||
===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 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/</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. | 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: | ||
Revision as of 09:59, 3 December 2018
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GMRA Anatomy™
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
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.