SECURITIES LENDING & REPO MARKETS

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - OCTOBER 2010

GLOSSARY

The act of marking to market.

Re-pricing/revaluation

A contract with a counterparty to sell and subsequently repur- chase securities at a specified date and price.

Repurchase agreement (repo)

Repurchase agreement. Generic term for a sale of collateral and a simultaneous agreement to repurchase equivalent assets on a future date or on demand (open repo), for the same value plus the payment of a return on the use of the purchase price during the term of the transaction.

Repo

The return earned on a repo transaction expressed as an interest rate on the cash side of the transaction.

Repo rate

Occurs when the market value of a security in a repo or a securi- ties lending transaction changes and the parties to the transaction agree to adjust the amount of securities or cash in a transaction to the correct margin level.

Re-pricing (Revaluation)

See repo.

Repurchase agreement

The maturity date of a repo.

Repurchase date

In a repo transaction, the amount of cash paid by the seller to the buyer on the repurchase date in exchange for equivalent collat- eral. The repurchase price includes the return on the cash.

Repurchase price

Occurs when the borrower of securities returns them to the lender.

Return

A contract with a counterparty to buy and subsequently resell se- curities at a specified date and price, the mirror image of a repo.

Reverse repurchase agreement (reverse repo)

In a repo transaction, the right that may be given by the buyer to the seller during the negotiation of the repo, for the seller to recall equivalent collateral during the term of the transaction and substi- tute collateral of equal quality and value. The substitute collateral must be considered reasonably acceptable to the buyer.

Right of substitution

To renew a trade at its maturity.

Roll

A situation in which settlement of securities transactions takes place each day, the settlement of an individual transaction taking place a given number of days after the deal has been struck. This is in contrast to a situation in which settlement takes place only on certain days – for example, once a week or once a month – and the settlement of an individual transaction takes place on the next settlement day (or sometimes the next but one settle- ment day) following the day the deal is struck.

Rolling settlement

page 68 | Securities Lending & Repo markets