TBA Margining: TMPG Best Practices & the Impact on Operations

On November 14, 2012, the Treasury Market Practices Group (TMPG) strengthened their existing “Best Practices for Treasury, Agency Debt, and Agency Mortgage-Backed Securities (MBS) Markets” to include a recommendation that “forward-settling agency MBS transactions be margined in order to prudently manage counterparty exposures.” This TMPG best practice recommendation will significantly impact the industry, to varying degrees across market participants, especially given the fast approaching June 2013 deadline for “significant progress” towards a solution, and end of the year to be “substantially complete” in implementing a margining process. The sheer size of the MBS market of approximately $270 billion in value traded daily, where the majority of transactions are forward-settling To Be Announced (TBA) trades, means that almost everyone will be impacted. Those firms that do not have a robust, flexible, sophisticated collateral management process and technology in place will be affected the most. Mitigating this existing counterparty credit risk is a critical area that must be addressed.

Read on to learn more about the looming TMPG recommendations and what your firm can do to prepare. 
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