Master Commodity Repurchase Agreement

Although the transaction is similar to a loan and its economic impact is similar to a credit, the terminology differs from that of credit: the seller legally buys the securities from the buyer at the end of the loan period. However, one of the essential aspects of rest is that they are legally recognised as a single transaction (significant in the event of the insolvency of the counterparty) and not as an assignment and redemption for tax purposes. By structuring the transaction as a sale, a repo offers lenders considerable protection against the normal operation of U.S. bankruptcy laws, such as. B automatic suspension and avoidance provisions. Commodity buybacks are a common alternative financing method. There are a number of advantages for both the financier and a commercial party, such as a trader when concluding the handover of the raw materials, but the parties must carry out the corresponding legal and accounting due diligence and carefully check the wording of the documentation to ensure that the desired results are achieved. 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. Deposits were traditionally used as a form of secured loan and were treated as such for tax purposes. However, modern repurchase agreements often allow the cash lender to sell the security provided as collateral and replace an identical security at the time of redemption. [14] In this way, the cash lender acts as a borrower of securities and the repo contract can be used to take a short position in the security, much like a securities loan could be used. [15] From the buyer`s point of view, a reverse repo is simply the same reverse transaction, not the seller`s. Therefore, the seller who carries out the transaction would qualify it as a “repo”, while in the same transaction, the buyer would qualify it as a “reverse repo”. “Repo” and “Reverse Repo” are therefore exactly the same type of transaction that is only described from opposite angles. The term “reverse repo et sale” is generally used to describe the creation of a short position in a debt instrument in which the buyer immediately sells on the open market the collateral provided by the seller as part of the repo transaction. .

. .

Fotos: Kathrin Leisch
Impressum | AGB