For traders of commercial enterprises, deposits are used to finance long positions, to access cheaper financing costs of other speculative investments and to cover short positions in securities. A sale/buy-back is the cash sale and pre-line repurchase of a security. These are two separate pure elements of the cash market, one for settlement in advance. The futures price is set against the spot price in order to obtain a market return. The basic motivation of Sell/Buybacks is generally the same as in the case of a conventional repo (i.e. the attempt to take advantage of the lower financing rates generally available for secured loans, unlike unsecured loans). The profitability of the transaction is also similar, with interest on the money borrowed from the sale/purchase being implicitly included in the difference between the sale price and the purchase price. Since a repurchase agreement is a method of selling/buying back loans, the seller acts as a borrower and the buyer as a lender. The guarantee refers to securities sold, which are usually from the government. Pension loans provide rapid liquidity. A buy-back contract is a short-term loan to raise money quickly.
The bank rate is explained. In 1982, the failure of Drysdale Government Securities resulted in a loss of $285 million for Chase Manhattan Bank. The result was a change in the use of accrued interest in calculating the value of pension securities. That same year, the failure of Lombard-Wall, Inc. led to a change in federal insolvency laws with respect to deposits.   The failure of ESM Government Securities in 1985 led to the closure of the Home State Savings Bank in Ohio and a rush to other banks insured by the Ohio Deposit Guarantee Fund. The failure of these and other companies led to the passage of the Government Securities Act of 1986.  With respect to the loan of securities, the guarantee must be obtained temporarily for other purposes, such as. B as short position hedging or use in complex financial structures. Securities are generally borrowed for a royalty, and securities borrowing transactions are subject to other types of legal agreements than deposits. A pension purchase contract, also known as repo, PR or Surrender and Repurchase Agreement, is a form of short-term borrowing, mainly in government bonds.
The distributor sells the underlying guarantee to investors and, by mutual agreement between the two parties, buys it back shortly thereafter, usually the next day, at a slightly higher price. Investment bank Lehman Brothers used deposits dubbed « repo 105 » and « repo 108 » as a creative accounting strategy to support its profitability reports for a few days during the reference season, and incorrectly characterized deposits as true sales. New York Attorney General Andrew Cuomo said the practice was fraudulent and took place under the authority of the audit firm Ernst and Young. Accusations have been laid against E-Y, according to which the company authorized the practice of using deposits for « the secret removal of tens of billions of securities from Lehman`s balance sheet in order to give a false impression of Lehman`s liquidity and to mislead the public invested ».  In some cases, the underlying assets may lose their market value during the life of the pension agreement. The buyer can ask the seller to finance a margin account on which the price difference is identified. The repurchase agreements authorize the sale of a security to another party with the promise that it will be repurchased at a higher price at a later date. The buyer also earns interest. Deposits with a specified maturity date (usually the next day or the following week) are long-term repurchase contracts. A trader sells securities to a counterparty with the agreement that he will buy them back at a higher price at a given time.