U.S.A.: Fails charge trading practice for late settlement of Agency Debt and Agency MBS trades
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The Treasury Market Practices Group (TMPG) and the Securities Industry and Financial Markets Association (SIFMA) have published the Agency Debt and Agency Mortgage-Backed Securities (MBS) Fails Charge Trading Practice.
The trading practice extends the scope of the previous trading practice that was introduced on 1 May 2009 for U.S. Treasury Securities and will initially apply to debentures issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks, and Agency MBS issued or guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae.
From 1 February 2012, in accordance with this trading practice, a buyer that fails to receive such securities against payment, in any cash or financing transaction, on the requested settlement date can claim a fails charge from the failing counterparty.
You can calculate a fails charge with the formula documented in the U.S. Agency Debt and Agency MBS Securities Fails Charge Trading Practice paper. The trading practice and related information can be found at www.newyorkfed.org/tmpg/.
Adoption of this trading practice by any market participant is strictly voluntary, and is subject to an initial agreement between trading parties.
Clearstream Banking supports this initiative, but will not intervene in the process to settle TMPG fails charge claims between trading parties. We inform you that:
- any arising claim dispute about late settlement must be dealt with directly by the concerned parties;
- we recommend that you closely monitor the settlement of U.S. Agency Debt and Agency MBS trades in order to ensure appropriate actions are being taken to avoid claims and fails charges resulting from settlement delays. Regular status updates for settlement instructions are provided via MT548 Settlement Status and Processing Advice.