The buy-back contract, or “repo,” the market is an opaque but important part of the financial system, which has recently attracted increasing attention. On average, $2 trillion to $4 trillion in pension transactions are traded every day — guaranteed short-term loans. But how does the pension market work, and what about it? The value of the security is generally higher than the purchase price of the securities. The buyer agrees not to sell the security unless the seller comes from his late part of the agreement. On the agreed date, the seller must repurchase the securities, including the agreed interest rate or pension rate. A reverse repurchase agreement is also called a reverse repo, which results in the execution of an agreement between the buyer and the seller, which stipulates that buyers of securities that have purchased securities or assets have the right to sell them at a higher price in the future, i.e. the seller who will have to accept the highest price in the future. How much of the portfolio of free cash securities is available for use in RRP operations? The FOMC instructed the Desk to conduct, overnight, RRP (ON RRP) transactions in amounts limited only by the value of the cash securities held at the soma, which are available for such transactions. To determine this value, the desk takes into account several factors, as not all cash securities held in the SOMA are available for such transactions.
First, some of the treasury bills held in the SOMA are required to carry out reverse retirement transactions with foreign official and international accounts. Second, some treasury bills are required to support the desk`s securities lending operations. If the desk were to perform RRPs, cash securities as collateral for unpaid RRP maturities would not be available as collateral for ON RRP operations. The short answer is yes – but there are significant differences of opinion on the extent of this factor. Banks and their lobbyists tend to characterize regulation as a bigger cause of problems than policy makers who put in place the new rules after the 2007-9 global financial crisis.