A claim by California's Orange County could diminish legal certainty across the repurchase agreement market and discourage dealers from engaging in transactions with municipal counterparties, the Public Securities Association said.

The Orange County claim seeks to nullify billions of dollars in transactions it completed in reverse repurchase agreements, saying the deals were outside the county's authority.

A ruling in favor of the claim could damage the "integrity and efficiency" of the $1.5 trillion repurchase-agreement market, the securities group said in a brief filed in the U.S. Bankruptcy Court in the Central District of California.

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