2) cash payment when buying back the guarantee Retirement operations (also known as rest) are carried out only with primary traders; Reverse charge arrangements (also known as reverse-rest arrangements) are concluded with both primary traders and an extensive set of reverse-pension counterparties, including banks, state-subsidised companies and money market funds. The fed reverse-repos are settled by DVP in which the securities are moved against simultaneous payment. In this case, the Fed sends guarantees to the traders` clearing bank, which triggers a simultaneous movement of money against the security. At this stage, the reserve assets are deleted. When the agreement expires, the trader returns the guarantees to the Fed DVP, which triggers the simultaneous return of the traders` money. This act restores the reserve assets that were erased at the front of the transaction. Repo operations are done in three forms: specified delivery, tri-party and retention (the “selling” party holding the guarantee for the duration of the repo). The third form (Hold-in-Custody) is quite rare, especially in development markets, especially because of the risk that the seller will become insolvent before the repo expires and the buyer will not be able to recover the securities that have been reserved as collateral for the transaction. The first form – the specified delivery – requires the delivery of a predefined loan at the beginning and expiry of the contract term. Tri-Party is essentially a form of shopping cart of the transaction and allows for a wider range of instruments in the basket or pool.
In the case of a tri-party-repo transaction, an external clearing agent or bank between the “seller” and the buyer is invited. The third party retains control of the securities that are the subject of the contract and processes payments from the “seller” to the “buyer”. Therefore, repurchase agreements and reverse-pension agreements are called secured loans, given that a group of securities – most often US Treasury bonds – insures the short-term credit agreement (as collateral for). Thus, in financial statements and balance sheets, pension agreements are generally recorded as credits in the debt or deficit column. The main difference for the owner of securities between a repo transaction and a securities lending transaction is that he pays interest in a repo transaction, while he receives interest in a securities lending transaction. In addition, in the case of a repo transaction, the owner of the securities is often required to deposit collateral, while in the case of a securities lending transaction, the owner of the securities often receives guarantees. While conventional deposits are generally instruments mitigated to credit risk, there are residual credit risks….