FICC's MBS Division provides the Pool Substitution message (or “CC” for Cancel/Correct) to support the simultaneous cancel of previously allocated pools with the notification of substituted pools. This benefit of this message is that it provides EPN members with time-stamped evidence of delivery of a Pool Substitution. Like all EPN message types the processing of the Pool Substitution message is subject to The Securities Industry and Financial Markets Association (SIFMA) guidelines governing good delivery (for example, tolerable variance or number of pools per million, etc.) Members are referred to the Uniform Practices published by SIFMA for detailed information on good delivery guidelines.
The Pool Substitution message provides members with an efficient method of transmitting Pool Substitutions to their allocation counterparties. The Pool Substitution message is structured to create a relationship between both the canceled and substituted pools. Canceled lots or pools are followed by substituted lots or pools of the same value (within variance).
Pool Substitution messages are passed to counterparties on a real time basis through EPN, and standard EPN validations are performed on Pool Substitution messages – that is the message will be validated for data integrity, but not for business terms. Consistent with other business messages, validation of the business terms of the Pool Substitution message is the responsibility of the sending and receiving members.
Submission of pool details in the Pool Substitution message require a system-defined ordering scheme whereby canceled lots are immediately followed by substituted lots.
Benefits Derived From The Pool Substitution Service
This service creates efficiencies in the allocation process:
- By providing a single message to effect cancels and substitutions of allocations, members are able to replace a “two message”, unlinked process and/or replace phone/fax substitutions with one streamlined process;
- Pool Substitution messages passed via EPN provide members with evidence of delivery and receipt of Pool Substitutions and an audit trail via reports for the message. Members have the ability to store these messages and incorporate them into their internal system as they see fit.