TMPG-Recommended Fails Charge Becomes Effective Wednesday

The agency debt and agency MBS fails charge trading practice recommended by the Treasury Market Practices Group (TMPG) goes into effect tomorrow.

The TMPG thinks that the trading practices will limit fails and support liquidity in these markets. The trade group issued a release on the recommendation on September 23, 2011.

The Federal Reserve Bank of New York issued a statement today supporting the fails charge, which can be found on the NY Fed's Web site. 

"The New York Fed supports the TMPG's efforts to reduce settlement fails in the agency debt and agency MBS markets, as it believes that prolonged, elevated settlement fails negatively impact market functioning and increase systemic risk," said Brian Sack, executive vice president and head of the New York Fed’s Markets Group. "As was the case with the implementation of a TMPG-recommended fails charge in the Treasury market in May 2009, the implementation of agency debt and agency MBS fails charges should reduce the level of settlement fails and support the functioning of these vital markets."