What is the 48-Hour Rule?

Transparency in Mortgage-Backed Securities Trading
The 48-Hour Rule
The 48-Hour RuleTransparency in Mortgage-Backed Securities Trading

Within the complex realm of mortgage-backed securities (MBS), the 48-hour rule serves as a guiding light for transparency and equity. Administered by the Securities Industry and Financial Markets Association (SIFMA), this regulation necessitates that sellers provide vital MBS details to buyers at least 48 hours before trade settlement. 

In this article, we'll delve into the importance of the 48-hour rule and how it shapes the MBS trading landscape.

What exactly does the 48-Hour Rule entail?

The 48-hour rule is a crucial component within the mortgage realm, ensuring transparency and informed decisions when dealing with to-be-announced (TBA) mortgage-backed securities (MBS). Before 3 p.m. Eastern Time, 48 hours prior to trade settlement, sellers are mandated to disclose comprehensive details about the underlying pool of mortgages backing the MBS to buyers. 

The Securities Industry and Financial Markets Association (SIFMA), formerly known as the Public Securities Association or Bond Market Association, is responsible for enforcing this regulation. Upholding this rule fosters transparency and fairness within the market.

In MBS trading, while specific details of the underlying mortgages may remain undisclosed, agreements on crucial factors like price and coupon are established. This streamlined approach ensures smooth operations and maintains liquidity within the market. Notably, the TBA market, where these securities are exchanged, ranks second most traded, following the U.S. Treasury market.

Understanding the 48-Hour Rule in Mortgage Trading

Mortgage-backed securities (MBS) represent bonds supported by mortgage loans, where similar loans are bundled into pools and sold as securities to investors. Investors receive interest and principal payments based on the payments made by borrowers of the underlying mortgages, with interest payments distributed monthly.

A to-be-announced (TBA) trade is essentially an agreement to trade MBS on a specified date without specifying the pool number, pool quantity, or exact amount involved. This lack of specificity stems from the TBA market's assumption that MBS pools are interchangeable, thus facilitating trading and liquidity.

The 48-hour rule plays a pivotal role in the mortgage allocation process, aiming to enhance transparency in TBA trade settlements. This rule dictates that the seller of a particular MBS must disclose the mortgages comprising that MBS to the buyer at least 48 hours before the trade settlement. Usually, this disclosure takes place on the day after the trade is executed, aligning with the standard T+3 settlement date.

Role of the 48-Hour Rule in the TBA Process

The TBA process offers advantages to buyers and sellers. It fosters increased liquidity in the MBS market by consolidating thousands of diverse mortgage-backed securities into a handful of contracts.

Participating in TBA trades involves mutual agreement on key parameters such as issuer maturity, coupon, price, par amount, and settlement date. The specific securities involved in each trade are revealed 48 hours prior to settlement.

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Emerging in the 1970s, the TBA market was created to streamline the trading of MBS issued by Fannie Mae, Freddie Mac, and Ginnie Mae, offering mortgage lenders a tool to hedge their origination pipelines.

The TBA market stands out for its exceptional liquidity among secondary markets for mortgage loans, fueling significant market activity. Notably, the trading volume in the TBA market ranks second only to that of the U.S. Treasury market.


In conclusion, the 48-hour rule in the domain of mortgage-backed securities serves not only as a regulatory obligation but also as a crucial tool for upholding transparency and liquidity in the market. Originating in the 1970s, it has grown to become a fundamental aspect of the TBA trading process, promoting smoother transactions and bolstering market efficiency.

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