Special Purchase And Resale Agreements

There are a number of differences between the two structures. A repo is technically a one-time transaction, while a sell/buy is a pair of transactions (a sale and a buy). The sale/redemption does not require specific legal documents, whereas a repo usually requires a framework contract between the buyer and the seller (usually the Global Master Repo Agreement (GMRA) ordered by SIFMA/ICMA). For this reason, an increase in risk compared to repo is associated. In the event of default by the counterparty, the absence of an agreement may reduce the legal position on the recovery of collateral. Any coupon payment on the underlying security during the term of the sale/redemption is generally returned to the purchaser of the security by adjusting the cash paid at the end of the sale/redemption. In a repo, the voucher is immediately sent to the security seller. Sale and Repurchase Agreement (SRA) is an open market operation carried out by the Central Bank of Canada, which aims to influence overnight interest rates and change the money supply. Treasury or government bills, corporate and treasury/government bonds, and shares can all be used as “collateral” in a repo transaction. However, unlike a secured loan, the right to securities passes from the seller to the buyer.

Coupons (interest to be paid to the owner of the securities) due while the buyer in repo holds the securities are usually directly passed on to the seller in repo. This may seem counterintuitive, given that the legal ownership of the security rights during the pension contract belongs to the buyer. Instead, the agreement could provide that the buyer will receive the coupon, adjusting the cash to be paid during the redemption in order to compensate for this, although this is more typical of sales/redemptions…