Repo and Reverse Repo Transactions

Repo transactions - sale of securities with a repurchase agreement. This service is available to Clients, who own liquid securities, usually bonds, and who have a need for a short-term loan.

The Reverse Repo transaction consists of two steps:

• The Seller has agreed to sell and the Purchaser has agreed to buy securities specified in the Transaction, by paying the Seller the price of the purchase in accordance with the stipulations of the Transaction. The Purchaser pays the Seller the price of the purchase only after registering the securities in the Purchaser's security account.
• at the same time the Purchaser has agreed to sell and the Seller has agreed to buy back at an agreed-upon time the said securities, paying the Purchaser the repurchase price in accordance with the stipulations of the Transaction. The Purchaser transfers the securities to the Seller's account only after the Seller has paid the Purchaser the repurchase price.

The repurchase price will be higher than the sales price, thus compensating the Purchaser (SEB banka) for advancing the funds. The interest rate, which is indirectly included in the repurchase price, is called the Repo rate, and will be close to the interbank money market rate in the corresponding currency. In this manner the Reverse Repo transaction allows the Client to borrow money at the lowest possible rate and to maintain his rights to the securities sold to the SEB banka as long as they are repurchased from the SEB banka at the stipulated time.