Financial Institutions Alert: Agency Mortgage-Backed Securities Trading - Industry Developments and New Master Agreement

The Treasury Market Practices Group ("TMPG") of the New York Federal Reserve recently recommended that forward-settling agency MBS transactions be bilaterally margined (i.e., market participants should exchange two-way variation margin) in order for market participants to prudently manage their counterparty exposures. In support of the recommended best practices, the Securities Industry and Financial Markets Association published a new form of Master Securities Forward Transaction Agreement (the "2012 MSFTA") making a number of amendments to the previous form published in 1996 to implement the recommendations.