General Collateral Financing Trades - GCF

DEFINITION of 'General Collateral Financing Trades - GCF'

A type of repurchase agreement which is executed without the designation of specific securities as collateral until near the end of the trading day. General collateral financing (GCF) trades utilize several Inter-Dealer Brokers, who act as intermediaries for the GCF trades. GCF trades allow both borrowers and lenders in the repo market to reduce their costs and decrease the complexity of handling securities and fund transfers for repo agreements.

BREAKING DOWN 'General Collateral Financing Trades - GCF'

The delay granted in specifying the exact collateral for the repo is advantageous for borrowers, who are then able to utilize the securities they have on hand to clear other, unrelated trades as necessary throughout the day. This avoids the time-consuming process of swapping collateral if it becomes needed by the borrower. GCF trades are also advantageous in that the use of the Inter-Dealer Broker allows borrowers and lenders to net out all of their GCF repo obligations at the end of each trading day, greatly decreasing the number of costly securities and fund transfers that must take place.

RELATED TERMS
  1. Additional Collateral

    Additional assets put up as collateral by a borrower against ...
  2. Collateral Value

    The estimated fair market value of an asset that is being used ...
  3. Collateral

    Property or other assets that a borrower offers a lender to secure ...
  4. Implied Repo Rate

    The rate of return that can be earned by simultaneously selling ...
  5. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities. ...
  6. Advance Rate

    The maximum percentage of the value of a collateral that a lender ...
Related Articles
  1. Retirement

    Money Market: Repos

    Repo is short for repurchase agreement. Those who deal in government securities use repos as a form of overnight borrowing. A dealer or other holder of government securities (usually T-bills) ...
  2. Personal Finance

    What Is Collateral?

    Collateral is property or other assets that a borrower offers a lender to secure a loan. If the borrower stops making the promised loan payments, the lender can seize the collateral to recoup ...
  3. Investing

    How Does Securities Lending Work?

    Securities lending is the act of loaning a stock or other security to an investor or firm.
  4. Investing

    What's a Reverse Repurchase Agreement?

    A reverse repurchase agreement is the buyer side of a repurchase agreement (also called a repo).
  5. Personal Finance

    What Is A Mortgage?

    A mortgage is a loan used to purchase a home, where the property serves as the borrower's collateral.
  6. Personal Finance

    Explaining Non-Recourse Debt

    Non-recourse debt limits a lender as to what it can and cannot pursue for collateral.
  7. ETFs & Mutual Funds

    Securities Lending: Cause Of The Next Financial Crisis?

    Securities lending can pose risks to investor's portfolios and the entire financial system.
  8. Investing

    What are the Five C's of Credit?

    The five C’s of credit are what banks and other lenders evaluate about a potential borrower when making a lending decision. The five C’s are Character, Capacity, Capital, Collateral and Conditions. ...
  9. Markets

    Repurchase Agreement

    A repurchase agreement is the equivalent of a short-term collateralized loan. An owner of marketable securities sells those securities to a buyer for cash. As part of the deal, the seller agrees ...
  10. Investing

    Understanding Structured Finance

    Structured finance refers to a complex financial transaction involving large financial institutions and companies with unique needs.
RELATED FAQS
  1. What is the difference between a repurchase agreement and reverse repurchase agreement?

    Learn how a repurchase agreement is a form of collateralized lending and a reverse repurchase agreement is a form of collateralized ... Read Answer >>
  2. What risks does the dealer (lender) in a reverse repurchase agreement take on?

    Read about the lender risks of participating in reverse repurchase agreements or for dealers who use the Fed's overnight ... Read Answer >>
  3. What is each party's role in a reverse repurchase agreement?

    Learn about the role of each party in a reverse repurchase agreement transaction, and find out why it's different if the ... Read Answer >>
  4. What is the difference between a term and open repurchase agreement?

    Learn about the main difference between a term and open repurchase agreement, including when each is used and how the interest ... Read Answer >>
  5. In a repurchase agreement (repo) why is a longer tenor more risky?

    Learn about the relationship between repo tenor length and risk, and find out how tenor affects interest rate risk and counterparty ... Read Answer >>
  6. What is a collateral assignment of life insurance?

    Learn about collateral assignment of life insurance so you can make a wise decision about what kind of collateral to use ... Read Answer >>
Hot Definitions
  1. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  2. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  3. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  4. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  5. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
  6. Real Rate Of Return

    The annual percentage return realized on an investment, which is adjusted for changes in prices due to inflation or other ...
Trading Center