Rehypothecation
Rehypothecation is a practice in precious metal trading and finance where a broker reuses collateral (like gold or silver) that was posted by their clients as security for their own financial purposes. Think of it like re-lending something that was already given to you as a guarantee. For example, if a client uses gold as collateral for a loan, the broker might use that same gold to secure their own borrowing. This practice is common in precious metal trading and investment banking, though it became more carefully regulated after the 2008 financial crisis.
Examples in Resumes
Managed Rehypothecation agreements for precious metal holdings worth $50M+
Developed risk management strategies for Rehypothecation of gold and silver assets
Led team establishing Rehypothecation compliance procedures under new regulations
Typical job title: "Precious Metal Traders"
Also try searching for:
Where to Find Precious Metal Traders
Professional Networks
Industry Resources
Example Interview Questions
Senior Level Questions
Q: How would you manage rehypothecation risk in a volatile market?
Expected Answer: Should explain strategies for tracking collateral value, maintaining proper client agreements, and ensuring compliance with regulatory limits on rehypothecation. Should mention diversification and stress testing.
Q: Describe a situation where you had to handle a rehypothecation chain issue.
Expected Answer: Should demonstrate experience with complex collateral situations, understanding of counterparty risk, and ability to resolve multi-party rehypothecation challenges.
Mid Level Questions
Q: What are the key regulations governing rehypothecation in major markets?
Expected Answer: Should show knowledge of different jurisdictional rules, especially US and UK regulations, and explain how these affect trading operations.
Q: How do you track rehypothecated assets across multiple transactions?
Expected Answer: Should explain methods for maintaining clear records of collateral use, ensuring proper documentation, and monitoring exposure levels.
Junior Level Questions
Q: What is rehypothecation and why is it important in precious metals trading?
Expected Answer: Should be able to explain the basic concept of reusing collateral and its role in providing market liquidity and financing.
Q: What documentation is required for rehypothecation agreements?
Expected Answer: Should mention client agreements, consent forms, and basic regulatory filings needed for rehypothecation arrangements.
Experience Level Indicators
Junior (0-2 years)
- Basic understanding of precious metals markets
- Knowledge of collateral management basics
- Familiarity with trading documentation
- Understanding of basic market regulations
Mid (2-5 years)
- Complex collateral management
- Risk assessment and monitoring
- Regulatory compliance management
- Client relationship handling
Senior (5+ years)
- Strategic risk management
- Advanced trading operations
- Global regulatory expertise
- Crisis management and problem-solving
Red Flags to Watch For
- Lack of understanding about regulatory requirements
- No experience with collateral management systems
- Poor knowledge of market risk principles
- Unfamiliarity with precious metals trading documentation
Related Terms
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