The ordinary type of a repo which entails that two parties enter into a contract to trade securities (bonds, stocks, money market instruments, etc.) where one party sells them to the other while simultaneously agreeing buy them back at a certain future date and for a specified price (higher than the original selling price). The other party pays the price (against holding the securities) which will be returned to the seller on the transaction’s maturity date (termination date). Over the lifespan of the transaction the buyer (payer of the price) would receive interest on the amount handed over on loan.

An example is a one-week repo for which a market making bank quotes a one-week interest rate as 4 1/2 – 4 1/4: the market maker stands ready to buy the securities on offer and lend cash at the higher end (4 1/2, i.e., 4.5%). It also stands ready to sell the securities and borrow cash (and as such pays interest on cash) at the lower end (4 1/4 or 4.25%).