48 hours prior to settlement, the seller is required to inform the buyer of the specific pools related to a TBA position. EPN supports allocation information and trade details, including trade terms and the securities intended for delivery on settlement date. The codes used to identify each security in the pool (e.g., MBS agency, product, coupon and maturity) are identical to those in the MBSD’s clearing system.
EPN users may exchange four different types of business messages to accomplish their notification needs. Three of the message types are for sellers. The other is for buyers. Sellers use the ON (Original Notification) message type to notify the buyer of an outstanding TBA allocation. Sellers also use the CX (Cancel) message to notify a buyer to disregard the terms of a previously sent ON. Please note that CX messages cannot be submitted against FICC accounts. Sellers can also use a CC (Cancel and Correct) message, which allows the seller to notify a buyer to disregard the terms of a previously sent ON and to replace those pools with new pool details provided in the message. Buyers use the DK (Don’t Know) message type to notify a seller that they do not concur with the terms of a previously sent ON.
The successful delivery of EPN messages is denoted by the EPN time stamp, and is independent of whether or not the recipient is logged on to the system. As a result, the number of failed trades and their associated costs has been dramatically reduced.
Clients can use Messaging Queue (“MQ”) and RESTful Application Program Interface (“API”) to communicate with EPN. MBSD has also implemented EaSy Pool (ESP) as a communications front-end to the EPN system to provide a Web-based solution for the real-time exchange of pool information. Using a TCP/IP dial-up connection or a leased line through DTCC’s SMART communications network, ESP provides for a “turnkey” implementation, with low start-up costs and a user-friendly message “turnaround” feature. MQ Messaging and API are typically used by high-volume organizations willing to develop or purchase custom application interfaces between EPN and their internal allocation (optimization) systems.
The EPN system processes all messages real-time. As users submit messages to EPN, EPN performs basic edits and validation checks to ensure essential data integrity. Subsequently, EPN timestamps each message and forwards the message to the outbound queue of the recipient so that it can be returned to the sender. The time stamp placed by EPN on the message is the sender’s evidence of “good delivery,” that is, that notification was sent within the 48-hour timeframe (by 15:00:00 EST, and by 12:15:00 EST for CC messages).
Since EPN is a queue-based system, a sender cannot receive a busy signal. Message recipients may connect to EPN at any time throughout the day to retrieve messages from their queues or submit messages to EPN. Volume and/or turn-around objectives determine how much connect time is necessary.