Overnight Reverse Repurchase Agreement for Canada

Overnight Reverse Repurchase Agreement Template for Canada

A Canadian-law governed Overnight Reverse Repurchase Agreement is a specialized financial contract used for short-term secured lending where one party agrees to purchase securities from another party with a commitment to sell them back the next business day at a predetermined price. This agreement operates under Canadian federal and provincial securities regulations, incorporating specific requirements for financial institutions and securities dealers operating in Canadian markets. The document includes detailed provisions for transfer of securities, margin maintenance, default scenarios, and settlement procedures, all tailored to comply with Canadian regulatory requirements and market practices.

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What is a Overnight Reverse Repurchase Agreement?

The Overnight Reverse Repurchase Agreement is a critical instrument in Canadian financial markets, used primarily for short-term liquidity management and secured lending operations. This document type is essential when parties wish to enter into a transaction where securities are sold with an agreement to repurchase them the following business day at a specified price, effectively creating a secured overnight loan. The agreement must comply with Canadian federal banking regulations, provincial securities laws, and relevant IIROC rules. It includes comprehensive provisions covering transaction mechanics, risk management, default scenarios, and operational procedures. This document is particularly relevant in the context of Canadian financial institutions' daily liquidity management operations and is structured to address specific Canadian regulatory requirements while maintaining alignment with international market practices.

What sections should be included in a Overnight Reverse Repurchase Agreement?

1. Parties: Identification of the buyer and seller in the reverse repo transaction

2. Background: Context of the agreement and brief description of the reverse repo transaction structure

3. Definitions: Definitions of key terms used throughout the agreement

4. Purchase and Sale: Core transaction terms including purchase price, securities involved, and repurchase terms

5. Transfer of Securities and Funds: Procedures and timing for the transfer of securities and payment of funds

6. Income Payments: Treatment of income or distributions on the purchased securities during the transaction period

7. Margin Maintenance: Requirements for maintaining margin and procedures for margin calls

8. Events of Default: Definition of default events and consequences

9. Remedies: Rights and remedies available to parties in case of default

10. Security Interest: Creation and maintenance of security interests in the transferred securities

11. Representations and Warranties: Standard representations and warranties from both parties

12. Covenants: Ongoing obligations of the parties during the term of the agreement

13. Termination: Conditions and procedures for termination of the agreement

14. Governing Law and Jurisdiction: Specification of Canadian law as governing law and jurisdiction for disputes

What sections are optional to include in a Overnight Reverse Repurchase Agreement?

1. Substitution of Securities: Optional provision allowing for substitution of securities during the transaction period, used when parties want flexibility in collateral management

2. Buy-in Procedures: Detailed procedures for buying in securities in case of failure to deliver, used in markets where buy-in is common practice

3. Agency Provisions: Additional provisions for transactions where one party acts as agent, used when involving broker-dealers or asset managers

4. Electronic Trading Provisions: Specific provisions for electronic trading platforms, used when transactions are executed electronically

5. Foreign Exchange Provisions: Provisions dealing with currency conversion, used when securities and cash are in different currencies

6. Tax Provisions: Detailed tax provisions, used when specific tax implications need to be addressed

7. Break Clause: Provisions allowing early termination under specific circumstances, used for longer-term repos

What schedules should be included in a Overnight Reverse Repurchase Agreement?

1. Schedule A - Eligible Securities: List of securities eligible for use in the reverse repo transactions

2. Schedule B - Margin Percentages: Table of applicable margin percentages for different types of securities

3. Schedule C - Transaction Procedures: Detailed operational procedures for executing transactions

4. Schedule D - Forms of Notices: Standard forms for margin calls, substitution notices, and other communications

5. Schedule E - Account Details: Settlement and account information for both parties

6. Appendix 1 - Confirmation Form: Standard form for transaction confirmations

7. Appendix 2 - Pricing Sources: Agreed sources for securities pricing and margin calculations

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Canada

Publisher

Genie AI

Document Type

Security Agreement

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Banking

Financial Services

Investment Management

Securities Trading

Asset Management

Insurance

Public Sector

Corporate Treasury

Capital Markets

Wealth Management

Relevant Teams

Treasury

Legal

Trading

Risk Management

Compliance

Operations

Settlement

Credit

Portfolio Management

Collateral Management

Middle Office

Front Office

Back Office

Financial Control

Investment

Relevant Roles

Treasury Manager

Risk Manager

Compliance Officer

Legal Counsel

Trading Manager

Settlement Officer

Portfolio Manager

Operations Manager

Credit Risk Officer

Securities Trader

Repo Desk Manager

Financial Controller

Chief Investment Officer

Collateral Manager

Senior Trader

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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