|
|
|
|
|
|
by throwaway2037
607 days ago
|
|
|
First, you are making lots of great points in your posts. Thanks for your comments. You wrote: > Not technically secured.
This raises a very interesting question. When institutional clients use a "repo" trading desk to pledge liquid assets for cash (or vice versa), from a legal perspective, it is not treated as a secured loan. (Yes, it is bizarre. Truly, looks like a duck, walks like a duck, quacks like a duck... but not a duck!)For these private bank-style loans backed by liquid equity stocks, are they considered secured or unsecured? Honestly, I don't know. |
|
|
Repos are collateralized and thus secured [1]. Legally, they don’t need to be because if the borrower defaults they just don’t buy back the asset; the seller has no further obligation to sell it to them and carries on their merry way.
Repos do however, require special exemptions to avoid being traded as purchases and sales by the IRS, so this is unlikely a valid workaround to a continuous step-up basis czar.
[1] https://www.icmagroup.org/market-practice-and-regulatory-pol...