Archives: Repurchase Agreements

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District Court Affirms that Zero Purchase Price Repo Transactions May Be Considered “Repurchase Agreements” Under the Bankruptcy Code

By Todd Zerega and Luke Sizemore INTRODUCTION On February 18, 2013, we reported that the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) found that individual repurchase transactions having a purchase price of zero may fall within the definition of “repurchase agreement” under the Bankruptcy Code provided that the master agreement … Continue Reading

Statement to Revise Terms of Overnight Fixed-Rate Reverse Repurchase Agreement Operational Exercise

By Todd Zerega and Cátia Kossovsky Effective Monday, April 7, 2014, the Federal Reserve Bank of New York (FRBNY) will revise the terms of its daily, overnight fixed-rate reverse repurchase operational exercise, to increase the maximum allotment cap from $7 billion per counterparty per day to $10 billion per counterparty per day.  All other terms … Continue Reading

Tri Party Repos: Monthly Volume Data

By Todd Zerega and Cátia Kossovsky The Federal Reserve Bank of NY released their monthly statistics of the U.S. tri-party repo market for January. For the month ending January 10, 2014, the total collateral in the U.S. tri-party repo market decreased by $60.86 billion, a decrease of less than 0.038%. Money Market and Agency Debenture & … Continue Reading

Fed Reserve Bank of NY Issues Update on Tri-Party Reform; Wants Industry Action on Fire Sale Risk

By Todd Zerega On February 13, 2014 the Federal Reserve Bank of New York ("NY Fed") issued an update on Tri-Party repo infrastructure reform. The update can be found here. In its update the NY Fed commended the industry for the reduction of intraday credit provided by the tri-party clearing banks. It indicated that the … Continue Reading

Tri Party Repos: Monthly Volume Data

By Todd Zerega and Cátia Kossovsky The Federal Reserve Bank of NY released their monthly statistics of the U.S. tri-party repo market for December. For the month ending December 10, 2013, the total collateral in the U.S. tri-party repo market decreased by $21.6 billion, a decrease of less than 0.015%. Corporates Investment Grade  and Money Market led … Continue Reading

Statement to Revise Terms of Overnight Fixed-Rate Reverse Repurchase Agreement Operational Exercise

By Todd Zerega and Cátia Kossovsky Effective Thursday, January 30, 2014, the Federal Reserve Bank of New York (FRBNY) revised the terms of its daily, overnight fixed-rate reverse repurchase operational exercise, to increase the maximum allotment cap from $3 billion per counterparty per day to $5 billion per counterparty per day.  In addition, the fixed … Continue Reading

Bankruptcy Code “Safe Harbor” Provisions Do Not Protect Contractual Right to Triangular Setoff

By Todd Zerega and Luke Sizemore CASE SNAPSHOT Prior to filing for bankruptcy, a debtor entered into a repurchase agreement with an investment bank and a swap agreement with an affiliate of the investment bank. Following commencement of the debtor’s bankruptcy case, the investment bank and its affiliate effectuated a triangular setoff whereby the banks … Continue Reading

ESMA Updates its Collateral Diversification Rules for MMFs

By Todd Zerega and Tom Watterson On December 20, 2013, the European Securities and Markets Authority (“ESMA”) proposed a revision (the “Proposed Revision”) to the collateral diversification requirements in the Guidelines on ETFs and other UCITS issues (the “Guidelines”). The Guidelines included a requirement that UCITS diversify the collateral held under “financial derivative transactions,” including repos, by … Continue Reading

Statement to Revise Terms of Overnight Fixed-Rate Reverse Repurchase Agreement Operational Exercise

By Todd Zerega and Cátia Kossovsky Effective Monday, December 23, 2013, the Federal Reserve Bank of New York (FRBNY) revised the terms of its daily, overnight fixed-rate reverse repurchase operational exercise, to increase the maximum allotment cap from $1 billion per counterparty per day to $3 billion per counterparty per day.  In addition, the fixed … Continue Reading

Tri Party Repos: Monthly Volume Data

By Todd Zerega and Cátia Kossovsky The Federal Reserve Bank of NY released their monthly statistics of the U.S. tri-party repo market for November.   For the month ending November 12, 2013, the total collateral in the U.S. tri-party repo market increased by $1.2 billion, an increase of less than 0.01%.  ABS (Investment grade) and … Continue Reading

NY Fed Again Revises Overnight Fixed-Rate Reverse Repo Exercises

By Todd Zerega and Cátia Kossovsky   Beginning on Tuesday, November 19, the Open Market Trading Desk of the Federal Reserve Bank of New York (FRBNY)  increased the fixed rate offered in its overnight fixed-rate reverse repurchase operations exercise again, this time, from 4 basis points to 5 basis points. All other terms of the exercise remain the same.  You … Continue Reading

Tri Party Repos: Monthly Volume Data

By Todd Zerega and Cátia Kossovsky The Federal Reserve Bank of NY released their monthly statistics of the U.S. tri-party repo market for October. For the month ending October 9, 2013, the total collateral in the U.S. tri-party repo market increased by $51 billion, an increase of 0.3%.  The amount of collateral increased for almost … Continue Reading

ESMA Collateral Diversification Rules with Respect to Repo May Hamper Operation of Government MMFs in Europe

By Todd Zerega and Tom Watterson In December of 2012, the European Securities and Markets Authority (“ESMA”) adopted Guidelines on ETFs and other UCITS issues (the “Guidelines”) that included a requirement regarding the diversification of collateral held for derivatives and repos. Section 43 e) of the Guidelines requires that UCITS diversify the collateral held under … Continue Reading

NY Fed Revises Overnight Fixed-Rate Reverse Repo Exercises

  By Todd Zerega and Cátia Kossovsky Effective Monday, October 21, 2013, the Federal Reserve Bank of New York (FRBNY) revised the terms of its daily, overnight fixed-rate reverse repurchase operational exercise, to increase the fixed rate from 1 basis point to 2 basis points. All other terms of the exercise will remain the same. … Continue Reading

Tri Party Repos: Monthly Volume Data

By Todd Zerega and Cátia Kossovsky The Federal Reserve Bank of NY released their monthly statistics of the U.S. tri-party repo market for September. For the month ending September 11, 2013, the total collateral in the U.S. tri-party repo market decreased by $68 billion, a decrease of 0.4%.  The amount of collateral decreased for almost … Continue Reading

Financial Stability Board Issues Final Policy Recommendations for Securities Lending and Repos and Proposes for Further Comment Minimum Haircut Levels

By Todd P. Zerega and Sarah L. Eddy In November 2012, the Financial Stability Board ("FSB") published policy recommendations for addressing financial stability risks in the securities lending and repo markets. On August 29, 2013, the FSB issued final policy recommendations with respect to certain of the November 2012 policy recommendations and reproposed policy recommendations … Continue Reading

In re Lehman Brothers Inc.: Repo Claims Fall Outside of SIPA Protection

  By Todd Zerega and Tom Watterson As part of the Lehman Brothers Inc. ("Lehman") bankruptcy, the Bankruptcy Court for Southern District of New York ("Court") determined that three banks’ (the "Claimants") claims in relation to repurchase agreements ("repos") were not "customer claims" entitled to customer protection under the Securities Investor Protection Act of 1970 ("SIPA"). … Continue Reading

Bankruptcy Court Concludes that Renewable Power Purchase and Sale Agreement is a “Forward Contract” Entitled to Safe Harbor Protections

By Todd Zerega and Luke Sizemore CASE SNAPSHOT Relying upon a four-part test developed by the Court of Appeals for the Fourth Circuit, the Bankruptcy Court determined that a renewable power purchase and sale agreement is a "forward contract" that is not subject to the automatic stay pursuant to the safe harbor provision of section … Continue Reading

The European Financial Transaction Tax and the Repo Market

By Todd Zerega and Tom Watterson Certain European Union ("EU") countries have proposed a financial transaction tax ("FTT") which could cause severe harm to segments of the repo market. The FTT would impose a 10 basis point fee on every transaction involving equity or fixed income securities, including repos and derivatives. However, the fee would … Continue Reading

TMPG Proposes New “Best Practices” for Settlement in the Tri-Party Repo Market

By Todd Zerega and Tom Watterson On April 19th, The Treasury Market Practice Group (“TMPG”) of the New York Fed proposed to revise its guidance to market participants, the Best Practices for Treasury, Agency Debt, and Agency Mortgage-Backed Securities Markets (the “Best Practices”) to support more timely trade confirmations in the tri-party repo market (the … Continue Reading

Tri Party Repos: Monthly Volume Data

By Todd Zerega and Tom Watterson The Federal Reserve Bank of NY released their monthly statistics of the U.S. tri-party repo market for February and March. For the month ending February 11, 2013, the total collateral in the U.S. tri-party repo market decreased by $21 billion, a decrease of 1.1%. The total collateral in the … Continue Reading

Under the “Bucket Theory,” Zero Purchase Price Repo Transactions Are Considered “Repurchase Agreements” Under Section 101(47) of the Bankruptcy Code by Todd Zerega and Luke Sizemore

By Todd Zerega and Andrew Cross Under the "Bucket Theory," Zero Purchase Price Repo Transactions Are Considered "Repurchase Agreements" Under Section 101(47) of the Bankruptcy Code by Todd Zerega and Luke Sizemore In re Homebanc Mortgage Corp., No. 07-51740-KJC, 2013 WL 211180 (Bankr. D. Del. Jan. 18, 2013) CASE SNAPSHOT The Bankruptcy Court found that … Continue Reading
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