FTD Alert! FOMC's decision to raise Fed Funds Rate by 25 basis points will not result in a change in TMPG Fail Charge. Settlement Obligation fails (FTDs in Treasury & Government bonds) will continue to be charged at the TMPG fail charge floor rate.
https://www.dtcc.com/-/media/Files/pdf/2023/5/3/GOV1469-23.pdf
https://www.dtcc.com/-/media/Files/pdf/2023/5/3/MBS1218-23.pdf
https://twitter.com/susannetrimbath/status/1521955876386394113
Dr. T dropping knowledge. They charge 3% MINUS fed funds target rate (minimum 1%)
Treasury Market Practices Group (TMPG), you can read more here (warning is a pdf to New York fed): https://www.newyorkfed.org/medialibrary/microsites/tmpg/files/04_01_2013_Fails_charges_FAQ.pdf
https://www.newyorkfed.org/medialibrary/microsites/tmpg/files/04_01_2013_Fails_charges_FAQ.pdf
TLDRS:
- Yesterdayโs FOMC decision to raise Fed Funds Rate by 25 basis points will not result in a change in TMPG Fail Charge.
- Settlement Obligation fails (FTDs in Treasury & Government bonds) will continue to be charged at the TMPG fail charge floor rate. The Fed ENABLES lower FTD costs for the DTCC.
- There is a 1% floor on the fine for FTDs in Treasury and Government bonds set by the TMPG that DTCC follows. Does not apply to stocks, though, where fees & margin calls follow a different process.
- They (the Fed) help make it easier to pay less on FTDs in treasuries while paying more in overnight RRP, boo!
