Abstract
Research Purpose
This paper explores the specific aspects of repo transactions, focusing on instances where third-party involvement, in the authors’ view, has the most significant impact on their structure.
Design/Methodology/Approach
The research uses the theoretical approach to examine the involvement of third parties in repo. Empirical findings from Latvian repo contracts, which highlight key contractual challenges, and insights from expert interviews on tri-party repo are also used.
Findings
The involvement of third parties in repo has significantly increased due to the revolution in settlement methods for both money and securities. A theoretical approach indicates that constructing a clear and legally correct repo contract requires not only legal expertise but also experience and a comprehensive understanding of the transaction. On the empirical side, it is evident that having experience and understanding of how repo works without deep legal knowledge does not necessarily guarantee that the contract will be legally correct and not misleading. Moreover, some amendments in the law are required to liquidate existing discrimination of certain types of repos.
Originality/Value/Practical Implications
The first Latvian study offering a theoretical basis to support development, to foster understanding and to prevent mistakes.