Editing Repurchase agreement (section)

=== Sell/buybacks and buy/sell backs ===
A sell/buyback is the spot sale and a forward repurchase of a security. It is two distinct outright cash market trades, one for forward settlement. The forward price is set relative to the spot price to yield a market rate of return. The basic motivation of sell/buybacks is generally the same as for a '''classic repo''' (i.e., attempting to benefit from the lower financing rates generally available for collateralized as opposed to non-secured borrowing). The economics of the transaction are also similar, with the interest on the cash borrowed through the sell/buyback being implicit in the difference between the sale price and the purchase price.

There are a number of differences between the two structures. A repo is technically a single transaction whereas a sell/buyback is a pair of transactions (a sell and a buy).
A sell/buyback does not require any special legal documentation while a repo generally requires a master agreement to be in place between the buyer and seller (typically the SIFMA/ICMA commissioned Global Master Repo Agreement (GMRA)). For this reason, there is an associated increase in risk compared to repo. Should the counterparty default, the lack of agreement may lessen legal standing in retrieving collateral. Any coupon payment on the underlying security during the life of the sell/buyback will generally be passed back to the '''buyer''' of the security by adjusting the cash paid at the termination of the sell/buyback. In a repo, the coupon will be passed on immediately to the seller of the security.

A buy/sell back is the equivalent of a "reverse repo".