In a REPO agreement at the same time it is concluded a trade in which the seller agrees to sell securities to the buyer and the buyer to pay the seller a purchase price, and a trade in which the buyer agrees to sell these securities to the seller at a specified date in the future and the seller to pay the buyer a repurchase price.

Participants shall enter into a classic REPO agreement where all risk associated with securities shall remain on the seller and the buyer is obliged to forward all incomes from securities (interest, principal payments and dividends) to the seller on the same day when it receives those incomes from the issuer.

Although looking at the legal nature of the REPO agreement it is a (re)purchase of securities, in essence it is a lending which is secured with the transfer of securities to the counterparty that provides funding. The difference between the repurchase price and the purchase price in the REPO agreement is an interest rate, i.e. the price paid for borrowed money.

On the Money Market it is allowed to enter into REPO agreement with maturity up to one year with the following securities:

• debt securities (T-bills, government, municipal and corporate bonds) and
• shares that are listed on the Official Market of the Banja Luka Stock Exchange.

REPO may be spot when securities are purchased on the trading day and future when a purchase of securities shall be in a future. It is allowed to enter into REPO agreements for the following standard terms:
 

• overnight (О/N) - funds are paid into the account of the borrower on the date of the transaction, while the funds shall be returned on the next business day,
• ТОM/NЕXТ (ТND) - funds are paid into the account of the borrower on the next business day after the date of transaction, while the funds shall be returned on the next business day,
• SPОТ/NЕXТ (SND) - funds are paid into the account of the borrower on the second business day after the date of transaction, while the funds shall be returned on the next business day,
• short-term (SТD) - repayment period 2-6 days,
• week (1WD) - repayment period is 7 days,
• two-weeks (2WD) - repayment period 8-14 days,
• three-weeks (3WD) - repayment period 15-21 days,
• month (1MD) - repayment period from 22 days to 1 month, 
• three months (3MD) - repayment period 1-3 months,
• six months (6MD) - repayment period 3-6 months,
• nine months (9MD) - repayment period 6-9 months, 
• year (1YD) - repayment period 9 months to 365 days,
• other (ОТH).

Participants receive repurchase agreements via STN. The parties may sign a framework bilateral REPO agreement which will define margin maintenance. Margin transfers of securities shall be made by an order of the Stock Exchange to the Central Registry of Securities, on the basis of instructions given by a party that has an obligation to make the transfer margin.

The Stock Exchange calculates benchmark repo rates and publishes them at the Money Market web pages.