48-Hour Rule

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48-Hour Rule

Key takeaways

  • The 48-hour rule requires sellers of to-be-announced (TBA) mortgage-backed securities (MBS) to disclose the specific mortgage pool details to buyers no later than 3:00 p.m. Eastern Time, 48 hours before the trade’s settlement date.
  • The rule is enforced by the Securities Industry and Financial Markets Association (SIFMA).
  • It brings transparency to TBA trades, which initially omit underlying mortgage details to increase liquidity and standardization.

What the 48-hour rule is

The 48-hour rule is part of the mortgage allocation process for TBA trades. A TBA trade is a forward contract to buy or sell MBS on a specified settlement date without naming the exact mortgage pools at the time the trade is agreed. The 48-hour rule requires the seller to notify the buyer of the specific mortgages (pool allocations) that will back the MBS at least 48 hours before settlement and by 3:00 p.m. Eastern Time on that day.

How the TBA market works

  • MBS are securities backed by groups of mortgage loans grouped into pools. Investors receive principal and interest payments based on borrower payments.
  • In the TBA market, buyers and sellers agree on general trade parameters—issuer, coupon, price, par amount, and settlement date—without specifying which pools will be delivered.
  • The assumption of interchangeability among similar pools enables high liquidity and standardization, making the TBA market one of the most actively traded secondary markets (second only to the U.S. Treasury market).

Why the 48-hour rule matters

  • It provides transparency by ensuring buyers learn the actual mortgage pools before settlement.
  • It preserves liquidity by allowing trades to be made on standardized terms while still giving buyers final allocation details shortly before settlement.
  • It supports efficient hedging for mortgage originators and other market participants who use the TBA market to manage pipeline and interest-rate exposure.

Timeline and enforcement

  • Standard industry settlement for many MBS trades is T+3 (trade date plus three business days). The 48-hour disclosure thus typically occurs on the business day after the trade is executed.
  • SIFMA enforces the rule and publishes procedures for pool notification and allocation.

Example

Company A sells an MBS to Company B on a Tuesday (trade date). Under T+3 settlement, the trade settles on Friday. Per the 48-hour rule, Company A must notify Company B of the specific mortgage pool allocations by Wednesday before 3:00 p.m. Eastern Time.

Sources

Securities Industry and Financial Markets Association (SIFMA) — materials on pool notification and the TBA market.