(Updated January 2019)

Understanding repo and the repo market
What is a repo?
2. What does repo do?
3. What is the role of repo in the financial markets?
4. How big is the repo market?
5. Who are the main users of the repo market?
6. What types of asset are used as collateral in the repo market?
7. What are the typical maturities of repos?
8. What is general collateral (GC)?
9. What is a ‘special’ in the repo market?
10. What is ‘rehypothecation’ of collateral?
11. What is the difference between a repurchase transaction and a buy/sell-back?
12. What is an open repo?
13. What is the difference between repo and securities lending?
14. Is repo in Europe the same as repo in the US?

How repos are managed
Is repo riskless?
16. Does repo encourage lending to risky counterparties?
17. Who regulates the repo market?
18. Why is it important to document repo?
19. What is the GMRA?
20. How do repo parties ensure they have enough collateral?
21. What is a haircut?
22. Who is entitled to receive coupons, dividends or other income payments on a security being used as collateral in a repo?
23. Who can exercise the voting rights and corporate actions attached to equity and corporate bonds being used as collateral in a repo?
24. What is tri-party repo?
25. What happens if a party fails to deliver collateral in a repo?
26. What happens to repo in a default?
27. What does a repo CCP do?
28. What happens to repo transactions when interest rates go negative?
Topical issues
29. What has been the regulatory response in the repo market to the Great Financial Crisis?
30. What is ‘short selling’ and what is the role of repo?
31. Do repos allow for infinite leverage?
32. Do changes in haircuts/margins exacerbate pro-cyclicality?
33. Do banks that lend through repo receive preferential treatment over other creditors?
34. Does repo ‘encumber’ a borrower’s assets?
35. Was a ‘run on repo’ the cause of the Great Financial Crisis in 2007?
36. Is repo a type of ‘shadow banking’?
37. Is repo used to remove assets from the balance sheet?
38. Could a repo rate benchmark replace LIBOR or EURIBOR?
39. How do MiFID II and MiFIR apply to the repo market in the EU?
Special articles
40. Mapping the interdealer European repo market (January 2019)
41. Repo: OTC or exchange-traded?
Frontclear, whose purpose is to facilitate more participative interbank markets, has commissioned a study to assess whether an exchange is likely to be more effect than an over-the counter (OTC) market in fostering the development of domestic repo trading in emerging financial markets, particularly frontier markets. The study, carried out by Richard Comotto the author of ICMA’s European Repo Survey, considers the arguments in favour of and against trading fixed income repo in OTC markets and exchanges, and reviews the evidence from four repo exchanges, Costa Rica, Kazakhstan, South Africa and Vietnam, with complimentary case studies from China, the Philippines, South Korea and European markets.

These FAQs have been written by Richard Comotto, Senior Visiting Fellow at the ICMA Centre at Reading University.

These FAQs are provided for information purposes only and should not be relied upon as legal, financial or other professional advice. While the information contained herein is taken from sources believed to be reliable, ICMA does not represent or warrant that it is accurate or complete and neither ICMA nor its employees shall have any liability arising from or relating to the use of this publication or its contents, including any information contained on any third party website which may be referred to or accessed through any of the hyperlinks above.

ICMA ERCC Guide to best practice in the European Repo Market

ICMA Zurich

T: +41 44 363 4222
Dreikönigstrasse 8
8002 Zurich
ICMA London

T: +44 20 7213 0310
110 Cannon Street
London EC4N 6EU
ICMA Paris

T: +33 1 70 17 64 72
62 rue la Boétie
75008 Paris
ICMA Hong Kong

T: +852 2531 6592
Unit 3603, Tower 2
Lippo Centre
89 Queensway, Admiralty
Hong Kong
Copyright © 2020 International Capital Market Association.