Recent Developments in the Securities Lending and Repo Markets

Securities lending, repurchase agreements (repos) and reverse repurchase agreements (reverse repos) all of which involve the movement of cash by one party and securities by the other party, are important and versatile transactions for mutual funds. They allow funds to earn an additional return on both their portfolio of securities and excess cash, and can also be used for borrowing purposes. For money market funds, repurchase agreements have become an increasingly important investment, as amendments to Rule 2a-7 under the Investment Company Act of 1940, as amended (the Investment Company Act), have forced money market funds into even higher quality and shorter-term investments. To keep reading, download the full article.