General Collateral Agreement

General Collateral Agreement

According to Yale economist Gary Gorton, the repo has grown to offer large non-depository financial institutions a method of secured lending, consistent with deposit insurance provided by the government in the traditional banking system, with guarantees being a guarantee for the investor. [3] The pension market is an important source of money for large financial institutions in the non-conservative banking sector, which can compete with the traditional bank deposit sector in its size. Large institutional investors, such as money funds, lend money to financial institutions such as investment banks, either in exchange (or through secured guarantees), such as government bonds and mortgage-backed securities held by borrowing financial institutions. It is estimated that $1 trillion a day of guarantees are being implemented in U.S. pension markets. [1] [2] In addition to the use of repo as a financing vehicle, repo-traders make “markets”. These traders are traditionally known as “matched book repo resellers”. The concept of trading lost books closely follows that of a broker who perceives both parts of an active trade that, for the most part, has no market risk but has only a credit risk. Elementary book-match resellers engage in both repo and reverse repo in a short period of time and record the offer/question preededad gains between reverse repo and repo rates. Currently, credit book repo distributors use other profit strategies, such as non-compliant maturities.

B, collateral swaps and liquidity management. CCGS are universal guarantees for re boarding operations. The Moscow Stock Exchange therefore expects them to facilitate liquidity and longer transaction times on the money market. While conventional deposits are generally instruments that are sifted against credit risk, there are residual credit risks. Although this is essentially a guaranteed transaction, the seller may not buy back the securities sold on the due date. In other words, the pension seller does not fulfill his obligation. Therefore, the buyer can keep the warranty and liquidate the guarantee to recover the borrowed money. However, security may have lost value since the beginning of the operation, as security is subject to market movements. To reduce this risk, deposits are often over-insured and subject to a daily market margin (i.e., if the guarantee ends in value, a margin call may be triggered to ask the borrower to reserve additional securities). Conversely, if the value of the guarantee increases, there is a credit risk to the borrower, since the lender is not allowed to resell it. If this is considered a risk, the borrower can negotiate a subsecured repot.

[6] The Moscow Stock Exchange is launching a new stock exchange called the General Collateral Certificate (GCC) to enable participants to increase their turnover in the equity and bond market and on the money market.