Rehypothecation, or reuse, is the use by a collateral taker of collateral it received, for example to deliver it in a repo or as its own margin. It is allowed under a title transfer arrangement or with the provider's consent under a security interest. Article 15 of the Securities Financing Transactions Regulation (SFTR) requires written disclosure of the risks and prior consent.
Collateral managementCollateral management is the set of activities to give, take and monitor assets that secure an exposure: agreeing eligibility and haircuts, valuing positions, calling and paying margin, substituting assets and settling movements. Collateral optimisation chooses the cheapest eligible assets to deliver across obligations.
Securities lendingSecurities lending is the temporary transfer of securities from a lender, often a fund or pension scheme, to a borrower that returns equivalent securities later and pays a fee. The borrower gives collateral (cash or securities) above the loan value; lenders keep the economic benefit of income through manufactured payments.
SFTR (Securities Financing Transactions Regulation)The Securities Financing Transactions Regulation (SFTR), Regulation (EU) 2015/2365, requires EU counterparties to report repos, securities lending, buy-sell-backs and margin lending to a trade repository by the working day after trade. It also sets disclosure rules for funds using these transactions and conditions for the reuse of collateral.
CSA (Credit support annex)A credit support annex (CSA) is the part of International Swaps and Derivatives Association (ISDA) documentation that governs collateral for derivatives between two parties: eligible assets, haircuts, thresholds, minimum transfer amounts, valuation and timing of calls. Regulatory CSAs set the terms needed to meet EU margin rules for uncleared derivatives.
Repo (Repurchase agreement)A repurchase agreement (repo) is a sale of securities together with an agreement to buy them back at a set price on a later date. Economically it is a secured loan: the seller borrows cash, the buyer lends it and holds the securities as collateral, with the price difference representing the repo rate.
SFTR (Securities Financing Transactions Regulation)The Securities Financing Transactions Regulation (SFTR), Regulation (EU) 2015/2365, requires EU counterparties to report repos, securities lending, buy-sell-backs and margin lending to a trade repository by the working day after trade. It also sets disclosure rules for funds using these transactions and conditions for the reuse of collateral.