Occurs when the market value of a security changes in a repo or securities lending transaction and the parties to the transaction agree to adjust the amount of securities or liquidity to the appropriate margin level during a transaction. The term REPO is a contraction of the sale and repurchase agreement. This is a transaction in which two parties simultaneously agree on two transactions: a sale of securities for cash, followed by a redemption on a pre-agreed date and price. This operation is called “retirement”. When repo transactions are settled by the Federal Open Market Committee of the Federal Reserve as part of open market operations, repo transactions add reserves to the banking system and then withdraw them after a certain period of time; Reverse-rests first remove reserves and then add them again. They are also a common instrument for central banks` open market operations. This transaction constitutes a repurchase of securities by the liquidity lender and a repurchase of securities by the securities lender. A sell/buyback is the cash sale and redemption at the front of a security. These are two separate direct spot market transactions, one for futures settlement. The futures price is set in relation to the spot price in order to obtain a return on the market.
The fundamental motivation for sales/redemptions is usually the same as for a classic repo (i.e.: The attempt to take advantage of the lower funding rates generally available for secured loans compared to unsecured loans). The profitability of the operation is also similar, with interest on the money borrowed by the sale/redemption implicitly in the difference between the sale price and the purchase price. . . .