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Repo

 

Repo (repurchase agreement) is a contract between the investor, who borrows money, and the lender who lends money and takes (buys and resells) securities for collateral, in case if the investor will default to repay the debt. 

 

Repo agreements may have different conditions, but in most cases this agreement is made for 3-6 months and you are paying agreement fee and interests. For that you get a loan, that most of the times you may use only for a stock acquisition and you get funds that are worth 50%-70% from value of you collateral. 

 

In practice repo now are used not so often as margin trading, but historically repo agreements was the background for margin trading, and they are still often used by less computerized brokerage companies or other financial intermediaries

 

 






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