Sponsored by the Federal Reserve Bank of New York, the Treasury Market Practices Group (“TMPG”) is a group of market professionals committed to supporting the integrity and efficiency of the Treasury, agency debt and agency mortgage-backed (MBS) markets. Widespread, persistently elevated fail levels in the agency MBS market create market inefficiencies, increase credit risk for market participants and heighten overall systemic risk. As a result, the TMPG recommends a fails charge with the objective of reducing the incidence of delivery failures.
As a CCP for the agency MBS market, MBSD processes this fails charge for its Clearing Members. For members “failing to deliver”, MBSD calculates and collects the fails charge based on the TMPG recommendations and passes the charge to the member with a “fail to receive.”
MBSD supports rate changes on fails. If fails accrue at one rate and the rate changes, the fail will keep the original accrual and then calculate new accruals at the new rate. This is true for fails and any substitutions that might be submitted. Substitutions are calculated utilizing the dual rate - original rate as of the date of the fail and the newer rate from the date of the change.
Collection and payment of the fail charges occurs on the following month’s Class “B” payable date as a component of Cash Settlement.
TMPG Financing Amounts
If FICC incurs any financing charges related to TMPG charges, the amounts will be prorated across all members and be debited as a component of Cash Settlement.