All obligations settle versus FICC on a Delivery vs. Payment (“DVP”) basis over the Fedwire®.
The MBSD CCP Pool Comparison and Netting service was designed to maximize overall savings by reducing the number of pool settlements.
Pool Netting, which launched in April 2012, introduced the comparison, trade guarantee, netting and Central Counterparty (CCP) settlement of pool allocations submitted in satisfaction of members’ outstanding TBA obligations. MBS Novation (implemented in July 2017) further extended CCP services by novating trades upon comparison and establishing FICC as the counterparty for all allocations and settlement.
Mortgage-backed securities are not traded through a formal exchange but rather through the over-the-counter market. As such, upon trade execution MBSD members submit all mandatory trade details, in the form of Trade Instructs (also referred to as Trade Creates), to MBSD for comparison (also referred to as trade matching) of the trade details submitted against them by their counterparties. The trade comparison service is mandatory for all MBSD Clearing Members.