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22. Who is entitled to receive a coupon, dividend or other income payments on a security being used as collateral in a repo?
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During the life of a repo, the buyer holds legal title to the collateral. In other words, the collateral is his property and he is entitled to any benefits of ownership. This means he should receive any coupon, dividend or other income that may be paid by the issuer of the collateral.

However, the seller of collateral retains the risk on the collateral, as he has committed to buy it back at a fixed price in the future (so, if the price falls between selling and buying, the seller will suffer the loss and vice versa). The seller would not accept the risk on the collateral unless he also received the return, including coupons, dividends or other income. To satisfy the seller, under the GMRA, the buyer agrees to pay him compensatory amounts equivalent to any income payment received on the collateral. In the UK, these are called manufactured payments.


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