What is a matched book repo?

What is a matched book repo?

activity is sometimes referred to as “matched book” repo, as securities borrowed by. the dealer are matched by those lent.3 Collateral and cash can pass through one or. more intermediaries in order to fulfil the needs of cash lenders (borrowers of.

Is a repo a true sale?

To the extent that ownership is treated as transferred to the repo buyer, a repo is treated as a true sale and repurchase.

What is UST repo?

A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities. In the case of a repo, a dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day at a slightly higher price.

Who can participate in repo market?

Only listed corporate debt securities that are rated ‘AA’ or above by the rating agencies are eligible to be used for repo. Commercial paper, certificate of deposit, non-convertible debentures of original maturity less than one year are not eligible for the purpose.

Why do banks use repo market?

The repo market allows financial institutions that own lots of securities (e.g. banks, broker-dealers, hedge funds) to borrow cheaply and allows parties with lots of spare cash (e.g. money market mutual funds) to earn a small return on that cash without much risk, because securities, often U.S. Treasury securities.

Where do repo trades settle?

CPSS countries, repo transactions are settled in central bank money, while in other countries they are settled in commercial bank money.

How much does a repo cost?

While your clients are often banks and lenders, you can also work with used car dealers. The average repo man charges banks about $200 per deal, and pre-owned car suppliers about $100.

Is repo a cash equivalent?

As we have determined that these reverse repurchase agreements are cash equivalents, they do not impact our Consolidated Statements of Cash Flows, which management concluded is consistent with the guidance of ASC 320-10-45-12.

What is triparty repo?

Tri-party repo is a type of repo contract where a third entity (apart from the borrower and lender), called a Tri-Party Agent, acts as an intermediary between the two parties to the repo to facilitate services like collateral selection, payment and settlement, custody and management during the life of the transaction.

What are repo specials?

A special is an issue of securities that is subject to exceptional demand in the repo and cash markets compared with very similar issues. Competition to buy or borrow a special causes potential buyers in the repo market to offer cheap cash in exchange.

What are different types of repo?

Types of Repurchase Agreement

  • #1 – Tri-Party Repo. This type of repurchase agreement is the most common agreement in the market.
  • #2 – Equity Repo.
  • #3 – Whole Loan Repo.
  • #4 – Sell/Buy or Buy/Sell Repo.
  • #5 – Reverse Repo.
  • #6 – Securities Lending.
  • #7 – Due Bill.

Can NBFC participate in repo?

NBFCs registered with RBI, including Government companies as defined in sub-section (45) of section 2 of the Companies Act, 2013 which adhere to the prudential norms prescribed for NBFCs by the Department of Non-Banking Regulation, Reserve Bank of India, may borrow/lend under repos with all eligible market participants …

How does matched-book repo work?

In a typical matched-book repo trade, a dealer would borrow $100 from a cash rich lender (e.g., a money market fund) and then on-lend the proceeds to a cash borrower (e.g., a hedge fund) in exchange for collateral. As part of this, the dealer would have to put up its own capital against $100 of repo exposure.

What is a matched book in banking?

In a different context, specifically in repo transactions, a matched book can take a different approach. Under this instance, a bank may leverage reverse repurchase agreements and repurchase agreements to maintain what is called a matched book even though there might not be a balance.

What is a repo-Repo?

What is a ‘Repurchase Agreement – Repo’. For the party selling the security and agreeing to repurchase it in the future, it is a repo; for the party on the other end of the transaction, buying the security and agreeing to sell in the future, it is a reverse repurchase agreement.

What are Repos and reverse repos?

Repos and reverse repos are thus used for short-term borrowing and lending, often with a tenor of overnight to 48 hours. The implicit interest rate on these agreements is known as the repo rate, a proxy for the overnight risk-free rate.