The main difference between a term and an open repo is between the sale and repurchase of the securities. If the purpose of the repoe is to borrow money, it is not technically a loan: the ownership of the securities in question actually comes and goes between the parties involved. Nevertheless, these are very short-term transactions with a guarantee of redemption. Open pension contracts (also known as open repo) have a longer term to maturity than futures. As a general rule, buyers and sellers do not meet a due date at the time of sale. Instead, each party can terminate the agreement at any time by informing the other party. Every day that one of the parties does not end the trade, it passes the next day. Lenders for retirement transactions are often hedge funds and brokers who manage large sums of money. Buyers of these agreements are often money funds, so you might be involved in the pension market without knowing if you have money on the money market.
A pension contract is a short-term loan structured as a sale of securities, with the seller agreeing to buy them back at a higher price at a later price, the difference being the effective interest rate on the loan. The securities involved are generally U.S. Treasury bonds that provide collateral for the loan. Pension agreements have a risk profile similar to all securities lending transactions. That is, they are relatively safe transactions, since they are secured credits, which are generally used as custodians by a third party. An open pension contract (also called on demand) works in the same way as an appointment period, except that the trader and counterparty accept the transaction without setting the due date. On the contrary, trade can be terminated by both parties by notifying the other party before an agreed daily period. If an open deposit is not completed, it is automatically crushed every day. Interest is paid monthly and the interest rate is reassessed by mutual agreement at regular intervals. The interest rate on an open pension is generally close to the federal rate.
An open repo is used to invest cash or finance assets if the parties do not know how long it will take them. But almost all open contracts are concluded in one to two years. A sale/buy-back is the cash sale and pre-line repurchase of a security.