Global Master Repurchase Agreement: A Comprehensive Guide

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

The Global Master Repurchase Agreement (GMRA) is an important legal framework for securities financing, offering crucial protections and benefits to investors, asset managers, financial professionals, and other financial institutions. Developed in 2017 by Genie AI – ‘the world’s largest open source legal template library’ - the GMRA is a comprehensive agreement which covers all facets of securities financing transactions, from common terms and conditions to pricing and settlement procedures.

The GMRA provides a number of distinct advantages for those involved in securities financing deals. Firstly, it ensures that each party’s rights and responsibilities are clearly set out within a legally binding document – reducing the risk of disputes or misunderstandings. Secondly, by delivering legal certainty through this contract-backed agreement investors can be sure that their investments are secure. Thirdly and most importantly however; the GMRA also offers flexibility as it can be customised to meet an individual user’s needs while simultaneously ensuring transparency across all parties involved in the transaction; helping to promote accountability and trust between all stakeholders.

At Genie AI we understand how valuable these agreements are for those working within financial services, which is why we provide free templates that anyone can use to draft their own high quality legal documents without having to pay for a lawyer’s services. With our community template library featuring millions of data points teaching our AI what a market-standard global master repurchase agreement should look like; you could soon have your own bespoke agreement up-and-running with just a few clicks!

So if you’re looking for an essential tool to structure your repurchase transactions; then look no further than the Global Master Repurchase Agreement (GMRA). Read on below for step-by-step guidance on using our template library today – no Genie AI account required!

Definitions (feel free to skip)

Governing Law: The set of rules that are used to interpret and enforce an agreement.
Choice of Court: The process of deciding which court will hear a dispute.
Indemnification: The process of holding a party liable for any losses incurred by the other party.
Limitation of Liability: A clause that limits the amount of damages a party can be held liable for in the event of a breach.
Jurisdictional Requirements: Requirements that must be met in order to comply with the laws of the countries in which the agreement is being used.
Regulatory Filings: Documents that must be completed in order for the transaction to be valid.

Contents

• Overview of the Global Master Repurchase Agreement (GMRA)
• Key provisions of the GMRA
• Rights & Obligations
• Termination Provisions
• Representations & Warranties
• Events of Default
• Different types of GMRAs
• Agency Agreements
• Dealer Agreements
• Cross-Border Agreements
• How the GMRA is used in securities financing
• The legal aspects of the GMRA
• Governing law
• Choice of court
• Indemnification
• Limitation of liability
• Regulatory considerations for GMRAs
• Jurisdictional requirements
• Regulatory filings
• The negotiation and execution process for GMRAs
• Drafting the agreement
• Negotiation of terms
• Execution of the agreement
• Strategies for managing risk associated with GMRAs
• Credit risk
• Operational risk
• Legal risk
• Market risk
• Best practices for structuring GMRAs
• Document structure
• Standard provisions
• Customization
• What to look for when selecting a GMRA counterparty
• Creditworthiness
• Operational capabilities
• Legal framework
• Reputation
• Review of the GMRA from the perspective of the parties involved
• Conclusion: Summary of the key points of the GMRA

Get started

Overview of the Global Master Repurchase Agreement (GMRA)

• Understand the purpose of the GMRA, which is to provide a uniform set of rules and regulations for repurchase agreements among financial institutions
• Learn the background and history of the GMRA and how it has evolved over the years
• Become familiar with the different types of repurchase agreements the GMRA covers
• Recognize the importance of the GMRA in providing a framework for managing and mitigating risk in repurchase transactions
• Check off this step and move on to the next step to learn more about the key provisions of the GMRA.

Key provisions of the GMRA

• Understand and define the rights and responsibilities of all parties involved
• Research and identify the key provisions and terms of the GMRA
• Consider the legal, regulatory and accounting implications of the agreement
• Analyze the credit and liquidity risk of the agreement
• Familiarize yourself with the indemnity, termination and default clauses
• Understand the reporting requirements and the operational procedures
• Check for consistency between the GMRA and other agreements

When you have accomplished the listed tasks, you can move on to the next step: ### Rights & Obligations.

Rights & Obligations

• Understand the rights and obligations of both parties under the GMRA
• Determine the scope of the agreement and the types of transactions to which it applies
• Outline the conditions that must be met for a repurchase transaction to be valid
• Determine the rate of interest and any applicable fees to be paid by either party
• Agree to the terms for terminating the agreement

When you can check this off your list and move on to the next step:

• Once you have determined the rights and obligations of both parties and outlined all the conditions for a valid repurchase transaction, you can move on to the next step.

Termination Provisions

• Identify the circumstances under which the agreement can be terminated, and include them in the termination provisions.
• Determine the notice period required to terminate the agreement and include it in the termination provisions.
• Specify the method of communication to be used when terminating the agreement and include it in the termination provisions.
• Include a provision that allows either party to terminate the agreement if the other party is in breach of its obligations under the agreement.
• Include a provision that allows either party to terminate the agreement if the other party becomes bankrupt or insolvent.
• Define the consequences of termination and include them in the termination provisions.

How you’ll know when you can check this off your list and move on to the next step:
When all of the termination provisions have been reviewed and finalized, the Termination Provisions step can be marked as complete and the next step can be started.

Representations & Warranties

• Gather the necessary documents and information from the parties involved to complete the representations and warranties
• Verify the accuracy of all representations and warranties in the Master Repurchase Agreement
• Ensure that each representation and warranty is given by the appropriate party and is legally binding
• Address any disputes that arise over the representations and warranties in the agreement
• Obtain the signature of all relevant parties on the agreement
• Check off this step from your list once all the representations and warranties have been verified and agreed upon by all parties.

Events of Default

• Understand the purpose of Events of Default provisions in a GMRA
• Learn what types of events may constitute an Event of Default
• Become familiar with the consequences of an Event of Default
• Learn the process for declaring an Event of Default
• Familiarize yourself with the remedies available in the event of an Event of Default
• When you can understand the purpose, types, process, and remedies of Events of Default, you can check this step off your list and move on to the next step.

Different types of GMRAs

• Understand the types of GMRA agreements - Fixed Price Repurchase Agreement, Variable Price Repurchase Agreement, and Repurchase Option Agreement
• Compare and contrast the three types of agreements and decide which one best suits your needs
• Decide if you need a Master Repurchase Agreement at all
• Once you have selected the type of GMRA that best suits your needs, you can move on to the next step of setting up the Agency Agreements
• When you have a thorough understanding of the different types of GMRA agreements, you can check this step off your list and move onto the next step of setting up the Agency Agreements.

Agency Agreements

• Identify the type of agency agreement that best suits your needs
• Establish the terms of the agency agreement, including the roles and responsibilities of each party
• Determine the fees associated with the agency agreement and how these fees will be paid
• Negotiate the terms of the agreement with the counterparty
• Finalize the agreement and ensure both parties have signed copies

Once the above steps have been completed, you can move on to the next step of the process, which is dealing with dealer agreements.

Dealer Agreements

• Research and negotiate all terms of the Master Repurchase Agreement with the relevant dealers
• Review and execute all ancillary agreements, such as the Master Securities Loan Agreement, related to the Dealer Agreements
• Ensure all Dealer Agreements are executed and in place prior to the closing of the Master Repurchase Agreement
• Confirm all parties have received and reviewed all applicable notices, certificates, and documents related to the Dealer Agreements
• When all of the above steps have been completed, you can move on to the next step of Cross-Border Agreements.

Cross-Border Agreements

• Review global master repurchase agreement (GMRA) to understand the legalities and implications of a cross-border agreement
• Identify which countries are included in the agreement
• Draft the cross-border agreement and determine appropriate terms and conditions
• Negotiate and finalize the agreement with all parties involved
• Ensure the agreement is legally binding in all applicable countries
• Sign the agreement and make copies for all parties
• Keep the agreement in a secure location

You’ll know you can check this step off your list and move on to the next step when you have finalized and signed the cross-border agreement and all parties involved have a copy of the agreement.

How the GMRA is used in securities financing

• Understand the concept of a GMRA and how it is used in securities financing
• Learn how a GMRA can function as a master agreement and provide a framework between the parties
• Identify the advantages and disadvantages of utilizing a GMRA in securities financing
• Analyze the various clauses included in the GMRA and their implications
• Research the relevant regulatory framework to ensure compliance with relevant laws
• Become aware of the legal implications of signing a GMRA

Once you have a thorough understanding of the GMRA and its use in securities financing, you can check this off your list and move on to the next step.

The legal aspects of the GMRA

• Understand the governing law of the GMRA, which is typically the law of the jurisdiction where the agreement is executed
• Understand the applicable document that governs the legal aspects of the GMRA, such as the International Swaps and Derivatives Association’s Global Master Repurchase Agreement
• Research the regulations and any other applicable laws in the jurisdiction where the GMRA is executed
• Double-check that the GMRA is in compliance with the applicable laws and regulations
• You’ll know you can check this off your list and move on to the next step when you have a clear understanding of the legal aspects of the GMRA and have verified that the GMRA is in compliance with the applicable laws and regulations.

Governing law

• Research and decide on the governing law for the GMRA
• This should be the law of the jurisdiction in which the securities are to be held
• Make sure to specify the governing law in the agreement
• You know you are done with this step when you have specified the governing law of the GMRA in the agreement

Choice of court

• Determine the jurisdiction in which the parties are entering into this agreement.
• Include a choice of court clause in the agreement. This will help specify the court that has jurisdiction over any disputes that may arise in regards to the agreement.
• Confirm that the choice of court has been explicitly agreed to by both parties.
• Once the choice of court has been agreed to and included in the agreement, this step can be checked off the list.

Indemnification

• Consider the appropriate indemnification obligations, liabilities, and other indemnification provisions that may be relevant to the agreement
• Negotiate with the other party on the indemnification provisions and make sure they are mutually agreed upon
• Ensure the appropriate language is included in the agreement
• Once you have established the indemnification provisions, you will be able to move on to the next step in the guide, which is Limitation of Liability.

Limitation of liability

• Ensure that the GMRA defines the limitations of liability for all parties involved in the repurchase agreement.
• Specifically, the GMRA should identify which parties are responsible for what, and set out the extent of their liability.
• Consider including a limit on the amount of damages that can be recovered in the event of a breach of the agreement.
• Make sure that the limitations of liability are fair and reasonable, and do not impose an excessive burden on any of the parties.
• When all parties are in agreement with the limitations of liability, the step can be checked off.

Regulatory considerations for GMRAs

• Make sure you understand all relevant laws and regulations in the jurisdiction where the GMRA is being negotiated
• Ensure that the GMRA is compliant with the applicable regulation and does not go against any laws of the jurisdiction
• Check if any exemptions are available and take into account potential changes to the applicable regulations
• Obtain advice from a qualified professional if needed
• Check that all parties involved are aware of the applicable regulations and their implications
• When you’ve done all of the above, you’re ready to move on to the next step.

Jurisdictional requirements

• Research applicable local laws and regulations that may apply to GMRAs in the jurisdiction
• Consider potential tax implications of a GMRA
• Obtain expert legal advice on the jurisdiction’s requirements for GMRAs
• Consider any specific requirements for the GMRA to be compliant with the jurisdiction’s laws and regulations
• Draft GMRA to comply with the jurisdiction’s requirements
• Verify GMRA is compliant with the jurisdiction’s requirements

Once you have researched the applicable laws and regulations, obtained expert legal advice, considered the potential tax implications, drafted the GMRA, and verified that the GMRA is compliant with the jurisdiction’s requirements, you can check this off your list and move on to the next step.

Regulatory filings

• Identify the filing requirements of each jurisdiction
• Prepare and file the appropriate documents in each jurisdiction, including the GMRA and any other required document
• Monitor the documents to ensure they are accepted, and no additional filings are required
• When all filings are accepted in all relevant jurisdictions, you can proceed to the next step: The negotiation and execution process for GMRAs

The negotiation and execution process for GMRAs

• Identify the parties that will be involved in the GMRA and the roles they will play
• Negotiate the terms of the GMRA with all parties
• Ensure the GMRA complies with the applicable regulations
• Finalize the GMRA and obtain signatures from all necessary parties
• File the GMRA with the appropriate regulatory agencies
• Ensure the GMRA is recorded with the appropriate registries

When complete, you should have a GMRA that has been negotiated, executed, and filed with the appropriate regulatory agencies, as well as recorded with the appropriate registries.

Drafting the agreement

• Draft the GMRA terms that are mutually agreed upon by the parties
• Ensure the agreement contains all the key provisions necessary to govern the repurchase agreement
• Clearly outline the rights and obligations of each party
• Assemble the signature pages and ensure they are properly executed
• Obtain a legal opinion from legal counsel
• Once all the components of the GMRA have been assembled, it is ready to be executed
• You will know when you can check this step off your list when the agreement has been properly drafted and all the necessary components are assembled.

Negotiation of terms

• Identify the parties to the agreement including their contact information
• Discuss the scope of the transaction, including the type of securities to be repurchased
• Discuss the date and time of the repurchase
• Discuss any applicable fees
• Negotiate the terms of the agreement, including the purchase price and any other terms
• Finalize any other elements of the agreement that are in dispute
• Once all terms are agreed upon, the parties can sign the agreement and proceed to execution
• You’ll know you can move on to the next step as soon as all terms of the agreement have been agreed upon and the parties have signed the agreement.

Execution of the agreement

• Draft and finalize a GMRA document, including all negotiated terms
• Ensure that the GMRA has been signed by all parties
• Obtain legal counsel to review the GMRA document
• Notify all parties involved that the GMRA is effective
• When all steps are completed, the GMRA is legally binding and enforceable by all parties involved.

Strategies for managing risk associated with GMRAs

• Understand the potential risks associated with GMRAs, including credit risk, liquidity risk, and legal risk.
• Put in place a system for monitoring the creditworthiness of the counterparty, including periodic reviews and credit ratings.
• Consider implementing a collateral management system to manage liquidity risk.
• Ensure that the legal terms of the agreement comply with local laws and regulations.
• Establish processes for reporting and responding to changes in market conditions.

You can check this step off your list when you have identified the risks associated with GMRAs, have a system in place for monitoring the creditworthiness of the counterparty, have considered implementing a collateral management system, have ensured that the legal terms of the agreement comply with local laws and regulations, and have established processes for reporting and responding to changes in market conditions.

Credit risk

• Understand the creditworthiness of the counterparty, including their credit rating, financial statements, and other relevant information
• Consider any collateral that may be provided to reduce the credit risk
• Monitor counterparty creditworthiness on an ongoing basis
• Establish a credit limit for each counterparty and stick to it
• Ensure that GMRA has proper language to protect your interests

Once you have completed these steps, you can check off this step and move on to the next one: ### Operational risk.

Operational risk

• Ensure that all parties have a clearly defined understanding of the operational processes and roles and responsibilities associated with the repurchase agreement.
• Make sure to include a mechanism for resolving operational issues that may arise during the course of the agreement.
• Verify that all parties have the necessary resources and technology to support the repurchase agreement.
• Develop a contingency plan to address any potential operational risks.

Once all of the steps related to operational risk have been completed, you can move on to the next step: Legal risk.

Legal risk

• Identify and assess applicable legal risks related to the Global Master Repurchase Agreement
• Consider the legal implications of all relevant laws, regulations, and industry standards
• Evaluate proposed changes to the Global Master Repurchase Agreement to ensure compliance with applicable laws
• Seek advice from legal counsel when necessary to ensure that the agreement is legally sound
• Monitor changes in applicable laws, regulations, and industry standards to ensure continued compliance
• When all legal risks have been identified, assessed and addressed, the Global Master Repurchase Agreement can be considered legally sound and ready to be signed.

Market risk

• Identify and calculate the potential exposure to market risk
• Analyze the potential exposure to market risk
• Develop strategies to reduce market risk exposure
• Monitor and manage the market risk of the GMRA
• When you have completed this step, you can move on to the next step ““Best practices for structuring GMRAs””

Best practices for structuring GMRAs

• Understand the legal and business needs of both parties when structuring the GMRA.
• Consider the types of transactions that will be made under the GMRA, such as repurchase agreements, securities lending, and other activities.
• Develop an appropriate risk management framework for the GMRA.
• Determine the appropriate language for the GMRA and make sure it adequately reflects the agreement between the parties.
• Consider the types of collateral that will be used for the GMRA and develop appropriate guidelines for their use.
• Determine the appropriate pricing and settlement terms for the GMRA.
• Develop appropriate governance and monitoring procedures for the GMRA.
• Draft the GMRA in accordance with the applicable laws and regulations.

Once the best practices for structuring GMRAs have been established, you can move on to the next step: Document structure.

Document structure

• Understand the different types of documents that comprise a GMRA, such as the Repurchase Agreement, the Collateral Agreement, and the Security Agreement
• Familiarize yourself with the standard provisions contained in each document
• Draft the documents to ensure that they accurately reflect the terms of the agreement
• Check the documents against applicable laws and regulations
• When you are satisfied that the documents meet all the legal requirements, you can move on to the next step.

Standard provisions

• Review the GMRA Annex A to ensure that all relevant provisions are included
• Identify any terms in the GMRA Annex A which need to be customized for the particular transaction
• Draft amendments to the GMRA Annex A or draft new provisions to be added to the GMRA Annex A as appropriate
• Incorporate changes/amendments to the GMRA Annex A into the GMRA
• Review the updated GMRA Annex A to ensure that all relevant provisions have been correctly included
• Review the GMRA to ensure that all changes/amendments to the GMRA Annex A are correctly reflected
• When all changes/amendments to the GMRA Annex A have been incorporated into the GMRA, you can check off this step and move on to the next step of customizing the GMRA.

Customization

• Review with counterparties to determine the need for any modifications or additions to the standard provisions
• Negotiate and agree to requested modifications or additions
• Check to ensure all modifications or additions conform to the applicable laws and regulations
• Once all modifications or additions are agreed to, check that they have been correctly reflected in the GMRA
• Check that the GMRA is signed by both counterparties
• You have completed the customization of the GMRA when all modifications or additions have been agreed to and included in the GMRA, and it has been signed by both counterparties.

What to look for when selecting a GMRA counterparty

• Research the financial strength of the counterparty and make sure it is creditworthy
• Understand the counterparty’s credit rating and any recent rating changes
• Ensure the counterparty is adequately capitalized and able to meet its obligations
• Verify that the counterparty has the ability to honor its contractual obligations
• Check that the counterparty is in compliance with all applicable laws and regulations
• Confirm that the counterparty has appropriate risk management policies in place

When you have completed this step, you can be confident that the counterparty you have selected is suitable for entering into a GMRA agreement.

Creditworthiness

• Examine the counterparty’s credit rating and financial health: check if the counterparty has a good credit rating and a strong financial standing.
• Research the counterparty’s track record with other parties: look into their history of dealing with other parties, and if they have had any issues in the past.
• Review the counterparty’s collateral requirements: make sure that the counterparty has adequate collateral requirements to back up its obligations.
• Confirm the counterparty’s ability to meet its obligations: examine the counterparty’s ability to meet its obligations, and if it has sufficient liquidity and financial resources.

You can check off this step when you are satisfied with the counterparty’s creditworthiness and financial health.

Operational capabilities

• Identify and assess the operational capabilities of the parties to the repurchase agreement.
• Consider the ability of the parties to comply with the terms of the agreement.
• Analyze whether the parties have the necessary personnel, systems, and processes to carry out the repurchase agreement.
• Confirm that the parties have the capacity to monitor, report, and track the financial performance of the agreement.
• When you have thoroughly assessed the operational capabilities of the parties and observed that they have the capacity to fulfill their obligations, you can move on to the next step.

Legal framework

• Understand the legal framework governing repurchase agreements, including the Dodd-Frank Act and the Basel III regulatory framework
• Familiarize yourself with the key terms and conditions of a master repurchase agreement
• Review any applicable laws and regulations in the jurisdiction in which the agreement will be executed
• Ensure that the parties to the agreement are in compliance with all applicable laws and regulations
• When all applicable laws and regulations are understood and complied with, you can move on to the next step in the guide.

Reputation

• Analyze the reputation of each of the parties involved (buyer, seller, and intermediaries)
• Identify any reputational risk that may arise from entering into the GMRA
• Assess the potential impact of any reputational risk on the parties involved
• Consider the potential consequences of any reputational issues
• When complete, check off this step and move on to the next step of reviewing the GMRA from the perspective of the parties involved.

Review of the GMRA from the perspective of the parties involved

• Understand the purpose of the Global Master Repurchase Agreement (GMRA) from the perspectives of the parties involved
• Identify the key provisions of the GMRA and how they impact the agreement between the parties
• Review the applicable laws, regulations, and standards that each party must abide by
• Analyze the potential risks and benefits associated with the GMRA from the perspectives of both parties
• Discuss the potential liabilities of each party
• Identify any potential conflicts of interest between the parties

When you can check this off your list and move on to the next step:

• When you have a clear understanding of the GMRA from the perspectives of the parties involved, and you have reviewed the applicable laws, regulations, and standards, analyzed the potential risks and benefits associated with the GMRA, discussed the potential liabilities of each party, and identified any potential conflicts of interest between the parties.

Conclusion: Summary of the key points of the GMRA

• Review the key points of the GMRA from both perspectives: the Buyer’s and the Seller’s
• Understand the different clauses and provisions that the GMRA covers
• Assess the implications of the GMRA for the parties involved
• Consider how the GMRA addresses the rights and obligations of both parties
• Make sure all parties involved have a clear understanding of the GMRA
• Confirm that the GMRA meets all legal and regulatory requirements
• When all parties agree to the GMRA, sign the agreement to make it official

You can check this off your list and move on to the next step once you have reviewed the key points of the GMRA from both perspectives, understood the different clauses and provisions, assessed the implications, and confirmed that the GMRA meets all legal and regulatory requirements.

FAQ:

Q: What is the difference between a Global Master Repurchase Agreement and a Global Master Securities Lending Agreement?

Asked by Olivia on 18th March 2022.
A: A Global Master Repurchase Agreement (GMRA) is a contract between two parties that governs the terms of repurchase transactions, such as the purchase and sale of securities. A Global Master Securities Lending Agreement (GMSLA) is a contract between two parties that governs the terms of securities lending transactions, such as the borrowing and lending of securities. The main difference between the two agreements is that GMRAs are used for repurchase transactions, while GMSLAs are used for securities lending transactions.

Example dispute

Suing Over Violations of a Global Master Repurchase Agreement

• Plaintiff must demonstrate that the other party to the global master repurchase agreement knowingly and willfully violated the terms of the agreement.
• Plaintiff must prove that the violation caused them to suffer economic harm or other losses.
• Plaintiff must demonstrate that they have taken all reasonable steps to mitigate their losses.
• Plaintiff must explain the extent of the losses suffered, and make a case for why they deserve to be compensated for those losses.
• Plaintiff must present evidence to establish the value of their claim, such as documents, financial records, and testimony from experts.
• Plaintiff must show that the other party to the agreement had a duty to act in accordance with the terms of the agreement and breached that duty.
• Plaintiff must show that they have been damaged as a result of the breach and are entitled to damages.
• Plaintiff must show that they have taken all reasonable steps to mitigate their losses.
• Plaintiff must explain the extent of the losses suffered, and make a case for why they deserve to be compensated for those losses.
• Plaintiff must present evidence to establish the value of their claim, such as documents, financial records, and testimony from experts.
• Plaintiff must be able to demonstrate that the breach of the global master repurchase agreement was the direct cause of their damages.
• Plaintiff must show that they did not contribute to their own losses, such as by not exercising reasonable care.
• Plaintiff must prove that the other party to the agreement had the ability to comply with the terms of the agreement and breached that obligation.
• Plaintiff must show that the breach was not caused by any intervening forces or events.
• Plaintiff must prove that the other party was aware of the terms of the global master repurchase agreement and willfully breached those terms.
• Plaintiff must show that they made a reasonable effort to mitigate their losses and that the other party’s breach was the proximate cause of their damages.
• Plaintiff must demonstrate that they have suffered actual, provable damages and that those damages were a direct result of the breach of the agreement.
• Plaintiff must present evidence to demonstrate the amount of damages they have suffered, either through financial records or expert testimony.

Templates available (free to use)

Global Master Repurchase Agreement

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