Page 142 - PRIAA Glossary

REPUDIATION/MORATORIUM
A credit event applicable to sovereign and some Asian reference entities which occurs when there is both a statement by an authorised government officer that repudiates or rejects the validity of one or more of their debt obligations, followed by a failure to pay or restructuring of one or more of such obligations.
REPURCHASE AGREEMENT (REPO)
A contract that combines a sale of securities with the obligation to buy back the securities at a later date. Repos are used for funding purposes by dealers. The purchase and sale prices are set to reflect an interest rate for a short-term loan.
REQUEST FOR QUOTE (RFQ)
An inquiry for contract, side and amount directed to one
or more dealers, auction-style. Historically, this trading protocol has been associated with over-the-counter (OTC) derivatives and lower levels of transparency but since October 2013 market participants have been using the RFQ protocol
for trading on SEFs (see swap execution facilities). These platforms require that each request receives at least three responses with the objective of increased transparency. Many industry participants believe that the RFQ model is the only trading protocol suitable for traditional OTC products which are more bespoke in nature and highly structured. They argue that a standardised Central Limit Order Book (CLOB) model which is associated with listed derivatives would not work because there would not be enough liquidity or standardisation in either execution or the associated infrastructure. According to ISDA, a regulatory requirement which forces the industry to trade products on a model which is not suitable may render them worthless and shrink the market.
RESIDENTIAL MORTGAGE BACKED SECURITY (RMBS)
A structured security backed by a pool of residential mortgages.
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