SIFMA today released the following statement on the revision to its standard Master Securities Forward Transaction Agreement (MSFTA):
“In coordination with the Treasury Market Practices Group (TMPG), SIFMA is pleased to announce that it has updated its 1996 Master Securities Forward Transaction Agreement (MSFTA) with a view towards making it a more broadly acceptable document that can support the TMPG recommendation that forward-settling agency MBS transactions be margined by both parties in order to mitigate counterparty and systemic risk.
“While many provisions were updated, providing for reciprocal rights and obligations for all parties, a significant change is that the new agreement provides only for two-way margining. SIFMA is pleased to support the TMPG’s margining recommendation by providing a contractual foundation for enhancing risk management practices in the marketplace.
“SIFMA undertook an accelerated process for these revisions so market participants would have a broadly-acceptable master agreement to document forward trades and support the implementation of the TMPG recommendation. The working group at SIFMA which revised the document received input from both buy- and sell-side firms in order to ensure the final document was balanced.”
