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 agreements are concluded in a year or two. Despite regulatory changes over the past decade, systemic risks remain for the repo space. The Fed continues to worry about a default by a major rean trader that could stimulate a fire sale under money funds that could then have a negative impact on the wider market. The future of storage space may include other provisions to limit the actions of these transacters, or may even ultimately lead to a shift to a central clearing system. However, for the time being, retirement operations remain an important means of facilitating short-term borrowing. Like many other parts of finance, retirement transactions contain terminology that is not common elsewhere. One of the most common terms in repo space is „leg.” There are different types of legs: for example, the part of the retirement activity that originally sells security is sometimes called „starting leg,” while the subsequent buyback is the „close leg.” These terms are sometimes replaced by „Near Leg” or „Far Leg.” Near a repo transaction, security is sold.
Two events collapsed in mid-September 2019 to increase the demand for liquidity: quarterly corporate taxes were due and this was the date of settlement of the Treasury bills previously auctioned. The result is a significant transfer of reserves from the financial market to the state, which has led to a disparity between demand and supply of reserves. But these two expected developments do not fully explain the volatility of the pension market. From the buyer`s point of view, a reverse repot is simply the same buyout contract, not the seller`s. Therefore, the seller executing the transaction would call it a „repo,” whereas in the same transaction, the buyer would refer to it as a „reverse repo.” „Repo” and „Reverse repo” are therefore exactly the same type of transaction that is described only from opposite angles. The term „reverse-repo and sale” is commonly used to describe the creation of a short position on a debt security in which the buyer immediately sells on the open market the guarantee provided by the seller as part of the repurchase transaction.