repo can be called a new stage in the development lending.They are more convenient and reliable option itself.The subject of the operations of this type are usually the securities, as they have a high liquidity and certain other advantages.In some cases the subject of the transaction can be a real estate or other property.Moreover, repos can be used actively in the exchange trading.
is worth noting that the Law on Securities ("On the Securities Market", FL) has made the necessary additions governing the conduct of such operations.This made them even more secure and eliminate the possibility of conflict between the parties.
Determination
REPO transaction - a procedure in which the sale takes place any values, followed by their repurchase through a specified period of time at a price fixed in the transaction.Mandatory repurchase, representing the final (second) stage of the transaction.
cost values, which are based on the part of the first stage of the transaction, usually different from the value, according to which will be the second stage.The difference may either higher or downwards.This difference is expressed as a percentage, is called the repo rate.In all cases, both the fixed cost at closing, and it does not change afterwards.
Application
Scope of repos extensive.Being used for the first time at the beginning of the 20th century, today they are a huge number of individuals and organizations everywhere.They have become very popular at the interbank level, can also be a variety of institutions with banks or other organizations.
are instances in which the repo-deals were made for other purposes.Namely - to receive a loan commitments that are not related to credit indebtedness and does not stack with her on the documentary level.That is, entering into a series of such transactions, the organization can get their hands on a large sum, but do not have a credit debt (in accordance with documents).
in lending
Lending is the main purpose of repos.Such procedures are a convenient alternative credit in the usual way.In fact, the seller takes the temporary use of money the buyer selling his value.In the second stage of the transaction, after a certain time, the seller buys back the same values, regaining ownership of them, and the buyer - his money.
In that case, if the seller does not have the necessary amount for the purchase of property, they will remain the property of the buyer.That is why such procedures are considered to be the most reliable option loans.An additional advantage is a fixed price, which is set at the time of the transaction and which will have to happen redemption value by the seller at the second stage.
In exchange business
During exchange trades, some of the participants are sometimes faced with the necessity of a sale of assets that are not in their presence.In this case it can be concluded repo transactions with a person in possession of the required assets there.He bidder buys the assets and resell them at will, opening a "short" position.Over time, "short" position is closed, resulting in a return to the values of the bidder, and it brings them back to the original owner, concluding REPO.
original owners usually are the stock brokers.Sami REPO transaction initially consisted only in securities, but now perhaps their conduct in relation to the goods and securities brokers since these operations are the most convenient way to provide traders with the possibility of opening "short" positions.
Types
There are many variations of this procedure.For each group of cases, the parties may choose the most suitable deal.The main terms and conditions under which you can select different types of transactions are possible and direction.Under the terms of
understand time, after which need to be fulfilled the obligation of the second phase of the transaction.Under the direction of the - the nature of actions of each party to the first and second stages of the procedure.
Direction
Direction such operations may be considered forward or backward.This depends on what role is played by each of the parties in the first stage of the transaction.That is, for one of the parties is a straight line, and for another - reverse.
- repurchase agreements: party acts as a seller, undertakes to perform the subsequent redemption of selling property.
- Reverse repurchase agreements: party acts as the buyer, which the seller agrees to buy back the value back to the second stage.
Expiring
of fulfillment is the period over which the obligation must be fulfilled the second stage.On this basis, such transactions may be intraday, futures, or open.
- Opened: characterized by the fact that any of the dates are not set, set only the fixed price at which the redemption is to be made of values.
- Term: have established the second phase of the offensive term exceeding one day before the expiry considered valid.
- Intraday: the redemption value is to be made the next day.
Features One of the features is how the accounting of repo transactions.Despite the fact that in the course of the procedure is performed twice for sale (first seller to the buyer, and then back again), subject to tax only income earned by one of the parties in view of the various amounts paid for the same assets in the first and second stages of the transaction.
addition, features repurchase previously been some ambiguity, that the parties should pay attention to.Subsequently securities law has been duly supplemented, so that these ambiguities were eliminated.
Benefits
main advantage is minimal risk.If either party fails to fulfill its commitments in the second phase, at the disposal of the other party will or cash or other valuables on the exact same amount.The only source of danger may be too high dynamics of changes in the value of these values.Depending on the situation, this factor can bring like some extra income and certain losses.
Moreover, among the advantages that REPO transaction - flexibility conditions.The parties may choose the appropriate time and they agree on a price that will be acceptable to each of them.
For the buyer
to hand, serving the first stage in the role of the buyer, the advantage is the ability to use the acquired property for its own purposes, before the onset of the second stage.This process is sometimes referred to as obtaining a loan of securities.With this advantage, REPO transactions with securities and other assets so widespread in the exchange business.
If the purpose of the operation is to issue a loan of money - the buyer in favor of the lender.The fact that the value of the property transferred to it, is insurance in case of borrower's default.
For the seller
for parties carrying out the first stage of the sale value, the advantage is to have a possibility of using the funds at its discretion, before the onset of the second phase of the operation.Because of this advantage, the procedures of this type have become an excellent alternative to the classic lending.
When it comes to granting loan securities, the seller will be the lender.Moving funds at his disposal will serve as insurance in case of default by the buyer values.
