The pool allocation process generally begins on 48-Hour Day, which is the day after TBA netting and two days before the SIFMA established contractual settlement date of the TBA trade. A TBA is a contract for the purchase or sale of agency mortgage-backed securities to be delivered at a future agreed-upon date; however, the actual pool identities or the number of pools that will be delivered to fulfill the trade obligation or terms of the contract are unknown at the time of the trade.
After the TBA netting process, members are notified of their long (buy) and short (sell) TBA obligations. At this point in the life-cycle of the trade, the pools that will be delivered by the seller to the buyer are still unknown. Since the seller is the party that will ultimately deliver the pools to the buyer, it is also the party responsible for allocating the pools to the TBA position and notifying the Buyer of the pool allocation. Even though TBA TFTDs and STIPs TFTDs are not TBA netting eligible, they still must be allocated since they are traded on a TBA basis.*
*Only SPTs do not require pool allocation because the actual pool number is known at the time of trade execution.