An Introduction to Repo Markets, Third Edition

1

The concept of clean and dirty prices, and accrued interest, is covered in Chapter 2 where we look at market background.

2

This is also known as a ‘buy/sell-back’. Not surprisingly, they mean the same thing!

3

Note that this method gives a slightly different answer compared with that of the Bloomberg method, which we discuss in Chapter 3.

4

These are the two international securities clearing systems. Banks such as JPMorgan Chase and Bank of New York also offer tri-party dealing.

5

The economic effect may be the same, but they are considered different instruments. TRS actually takes the assets off the balance sheet, whereas the tax and accounting authorities treat repo as if the assets remain on the balance sheet. In addition, a TRS trade is conducted under the ISDA standard legal agreement, while repo is conducted under the GMRA standard repo legal agreement. It is these differences that, under certain circumstances, make the TRS funding route a more favourable one.

6

There may be legal, administrative, operational or other reasons why a repo trade is not entered into to begin with. In these cases, provided that a counterparty can be found and the funding rate is not prohibitive, a TRS may be just as suitable.

7

See Choudhry (2004) for background on commercial paper conduits.

8

The top S&P and Fitch short-term credit ratings are A-1+ and F-1+.

9

As ever, thanks to Derek Taylor at King & Shaxson Limited, this time for that day back in January 1996 when, on a query from ...