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13. What is an open repo?
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An open repo (also known as on demand repo) is a repurchase agreement that is agreed without fixing the maturity date. Instead, the repo can be terminated on any day in the future by either party, provided they give notice before an agreed daily deadline.

Until an open repo is terminated, it automatically rolls over each day. Interest accrues daily but is not compounded (ie interest is not earned each day on interest accrued over previous days). Where parties have open repos outstanding between themselves all the time, accumulated interest is typically paid off every month. The initial repo rate on an open transaction will be close to the overnight repo rate, but it will not subsequently change until the parties agree to re-set the rate. Open repo is used to invest cash or finance assets where the parties are not sure how long they will need to do so.


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