Parallel Production Update

As announced in Important Notice (#MBS0187.06 dated December 1, 2006) FICC  initiated a parallel production period on December 4, 2006 allowing MBSD cash settling banks to access simulated results as if processing were conducted via the new Auto Cash Settlement service.  All MBSD Cash Settling Banks were strongly encouraged to be proactive during this period to ensure their operational readiness. During this parallel production period, MBSD has, on a daily basis, successfully executed the processes necessary to create the twice daily PBS broadcasts. Additionally, many cash settling banks have simulated the process of acknowledging these broadcasts which is a prerequisite for MBSD to finalize cash settlement via the FRBNY NSS.

MBSD will continue to sponsor the parallel production period until close of business, January 11, 2007. At that time, MBSD will announce the effective date for the production implementation of Auto Cash Settlement.

Important Messages for MBSD Participants:

1. MBSD participants are reminded that until further notice, actual cash settlement will continue to be processed as it is today with the existing deadlines. MBSD participants with net debit cash obligations must ensure MBSD’s receipt of these funds via Fedwire by 12:00 noon (ET) on the designated Due Date and MBSD will continue to release net credit settlement obligations later in the day
2. All participants are encouraged to contact their designated cash settling bank to ensure (a) all bank documentation requirements have been satisfied (b) all internal procedures have been finalized and  (c) there are no remaining open issues.

Important Message for MBSD Cash Settling Banks:

1. All cash settling banks must take affirmative actions on January 10, 2007 and/or January 11, 2007 based on the PBS broadcasts executed during the parallel production to revalidate their operational ability to support this process. Those banks wishing to obtain a preliminary list of what the PBS broadcast will include should contact the undersigned on January 9, 2007.
2. MBSD will provide updated PBS procedures for all cash settling banks prior to the conclusion of the parallel production period.

Prior Important Notices regarding this initiative were published on the following dates:

December 8, 2006       (Important Notice #MBS190.06)

December 1, 2006       (Important Notice #MBS187.06)

August 17, 2006           (Important Notice #MBS121.06)

July 20, 2006               (Important Notice #MBS107.06)

May 12, 2006              (Important Notice #MBS076.06)

April 4, 2006                (Important Notice #MBS058.06)

MBSD Auto Cash Settlement Contact Information:

PBS related issues and questions:

DTCC Settlement Operations Hotline:                            212.855.5800

MBSD related issues and questions:

Stephen Borghardt, MBSD Operations Manager:            212.855.7671

MBSD Operations Hotline:                                             212.855.7886

Thomas Quaranta, DTCC Relationship Management:      212.855.7651

James Ferraro, DTCC Relationship Management:            212.855.7593

Please contact the undersigned at 212.855.7670 or gparasole@ficc.com. for additional information.

George Parasole

Director, Product Management