An Introduction to Repo Markets, Third Edition

Chapter 8

THE GLOBAL MASTER REPURCHASE AGREEMENT¹⁷

In this chapter we introduce the standard repo legal agreement under which most repo trades are carried out, the Global Master Repurchase Agreement (GMRA).

TBMA/ICMA AGREEMENT

The Bond Markets Association (TBMA) – previously called the Public Securities Association (PSA) – is a US-based body that originally developed the market standard documentation for repo in the US domestic market, introduced in February 1986. It developed in conjunction with the International Securities Market Association (ISMA) – renamed the International Capital Markets Association (ICMA) in October 2005 – the Global Master Repurchase Agreement. This is the market standard repo document used as the legal basis for repo in non-US dollar markets, introduced in November 1992. It was updated 3 years later to include UK gilts, buy/sell transactions and relevant agency annexes.

The agreement covers transactions between parties including repo, buy/sell-back and agency trades, and has adapted for securities paying net, as well as for equities.

The key features of the agreement are that:

• repo trades are structured as outright sales and repurchases;

• full ownership is conferred on securities transferred;

• there is an obligation to return ‘equivalent’ securities;

• there is provision for initial and variation margin;

• coupon is paid over to the repo seller at the time of payment;

• legal title to collateral is confirmed in the event of default.

The main advantages ...