Edaa rolls out repo collateral transfer service under repurchase agreements

The Securities Depository Center Co. (Edaa) today announces launching the repo collateral transfer service to facilitate transfers under repurchase agreements.

The new service is part of Edaa’s strategic plans to provide innovative and efficient solutions for all market participants, in line with international standards. It also comes as part of the Financial Sector Development Program initiatives, Vision 2030.

The REPO collateral transfer is an optional service provided by Edaa through its members to arrange for repurchase agreements. The service is provided to accommodate market needs to establish a safe and secure financing framework where collateral is seamlessly transferred between sellers and buyers reducing associated credit risks.

A REPO transaction is applicable when a seller has securities at hand and needs liquidity, while the buyer has the liquidity and needs a safe investment channel to make profit for a specified period of time.

The seller and buyer have to agree on the below:

- The REPO terms such as currency, amount, collateral, duration, haircuts, REPO term etc.

- The REPO buyer and seller exchange cash and collateral as two independent transactions. Collateral transfer is facilitated through Edaa system (from seller to buyer), cash is settled independent of Edaa systems.

- With the termination of REPO contract, REPO buyer returns the collateral to REPO seller. Collateral transfer is facilitated through Edaa system (from buyer to seller), cash is settled independent of Edaa systems.

By enabling the service, Edaa aims to introduce a market framework for repurchase agreements and provide participants with a tool to enhance risk management by allowing transfers of participant collateral through Edaa custody members.