An Introduction to Repo Markets, Third Edition

GLOSSARY

Glossary of terms used in repo markets.

Agent The gilt repo code uses the term ‘agent’ to cover participants in the market such as fund managers and custodians who undertake repo transactions on behalf of (principal) clients.

All-in price See Dirty price.

BMA (TBMA) The Bond Market Association (previously the Public Securities Association). A US-based organisation which developed the market standard documentation for repo in the US domestic market, and which developed with ICMA the Global Master Repurchase Agreement (GMRA).

BMA/ICMA Global Master Repurchase Agreement Developed by BMA and ICMA jointly, this is the market standard documentation for non-dollar repo markets. A revised edition was issued in November 1995. The Gilt Repo Legal Agreement is an amended version of the revised edition (through the inclusion of a Part 2 to its Annex I and modified by a side letter in connection with the upgrade of the CGO service in 1997) designed to meet the needs of the gilt repo market.

Basis risk A form of market risk that arises whenever one kind of risk exposure is hedged with an instrument that behaves in a similar, but not necessarily identical way. For instance, a bank trading desk may use 3-month interest rate futures to hedge its commercial paper or euronote programme. Although eurocurrency rates, to which futures prices respond, are well-correlated with commercial paper rates they do not always move in lock step. If therefore commercial paper rates move by 10 basis points ...