Fixed Income Clearing Corporation’s Mortgage-Backed Securities Division

SIFMA, the American Bankers Association (ABA), and the Financial Services Roundtable (FSR) submit comments to provide comments to multiple federal agencies on the capital treatment of exposures to the fixed income clearing corporation’s mortgage-backed securities division (MBSD) under the bank capital proposals.  Agency mortgage-backed securities (MBS) trading on the “to be announced” (“TBA”) market are a crucial component of the U.S. mortgage market. The recent introduction of a central counterparty (“CCP”) for this market—MBSD—has raised questions for clearing member banking organizations regarding the appropriate capital treatment of exposures to MBSD under the proposals. Banking organizations currently treat TBAs as derivative exposures under the U.S. Basel II advanced approaches rules. However, MBSD is regulated by the Securities and Exchange Commission (“SEC”) as a CCP for cash transactions. Significantly, MBSD is not a derivatives clearing organization regulated by the Commodity Futures Trading Commission (CFTC).