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9. Is repo in Europe the same as repo in the US?
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There are important differences in the way that repo works in Europe compared with the US, and between the structure and operation of the two markets.  

In Europe, repo transfers legal title to collateral from the seller to the buyer by means of an outright sale (also known as a true sale). Under New York law (the predominant jurisdiction for US repo), transferring title to collateral is difficult. Instead, collateral is pledged but exempted from certain provisions of the US Bankruptcy Code that normally apply to pledges, in particular, the automatic stay on enforcement of collateral in the event of insolvency. In addition, unlike in traditional pledges, the pledgee/buyer in a US repo is given a general right of use of collateral. Consequently, the resulting rights are deemed to be much the same as those achieved by an outright sale.

Repo agreements under New York law also include a fall-back provision to re-characterise repo as secured lending in the event that a buyer’s rights to collateral proves not to be enforceable in law. Such a fall-back provision does not work under English law.

In contrast to the European repo market, the US market is dominated by tri-party repo (see question 24), where post-trade collateral selection, management and settlement are outsourced to an agent. Tri-party repo may account for something in the order of two-thirds of the US party, whereas it is around 10% of the European market. Moreover, there are fundamental differences between the European and US tri-party repo markets (see question 24).

The US repo market has traditionally had a shorter average maturity than the European market (see question 7) and repo has tended to account for a higher proportion of the balance sheets of key market intermediaries.


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