The agency MBS market is one of the most important and liquid fixed income markets in the world, serving as a key transmission mechanism for monetary policy and a core holding for a vast range of institutional portfolios. Within that ecosystem, the TBA market stands as its beating heart, with average daily trading volume exceeding $260 billion—more than 90% of total agency MBS activity. Yet despite its size and importance, the TBA market remains one of the most exclusive and difficult-to-access segments of global fixed income.

Participation in the TBA market has long relied on bilateral, over-the-counter trading frameworks built around the Master Securities Forward Transaction Agreement (MSFTA). This document governs forward-settling transactions—especially those involving agency MBS—but it also imposes significant legal, operational‌ and documentation hurdles. Signing MSFTAs requires dedicated legal teams, bilateral credit approvals, collateral management infrastructure and typically a relationship with a primary dealer. For many institutional investors—particularly foreign entities, UCITS funds‌ and managers operating across dozens or hundreds of accounts—these requirements represent a high barrier to entry.

Execution presents an additional challenge. Traditional TBA trading remains quote-driven and relationship-based, often conducted via voice or messaging, with limited access to firm pricing or centralized liquidity. There's no public order book, no consistent price transparency‌ and no anonymous execution. For market participants accustomed to screen-based trading, electronic access‌ and central clearing—norms in equities, Treasury futures‌ and even corporate credit—the TBA market can feel like a throwback to a different era.

Even for those who manage to break in, operational complexity persists. Every new counterparty relationship requires fresh documentation. Allocating trades across separately managed accounts often means replicating legal agreements and managing bespoke margin arrangements across platforms. These frictions not only increase cost and risk, they fundamentally limit the reach and scalability of MBS investing through traditional channels.

TBA futures offer a modern, exchange-listed alternative to traditional bilateral TBA trading. These contracts provide access to the same 30-year UMBS exposure, but through a standardized, centrally cleared futures framework that addresses long-standing barriers to entry.

The contracts are physically settled and follow the same forward-settling conventions as traditional TBAs. Trading takes place electronically on Globex via a central limit order book (CLOB), providing price transparency, firm liquidity and anonymous execution. This structure reduces reliance on dealer relationships and manual workflows, and brings the execution experience in line with other listed fixed income products.

All trades are cleared through CME Clearing, which removes bilateral counterparty credit risk and eliminates the need for MSFTA agreements. Investors benefit from a regulated clearinghouse framework, with consistent margining, consolidated risk management ‌ and operational efficiency.

This structure simplifies access for pooled vehicles, UCITS funds, SMA managers and global investors. Futures can be executed centrally and allocated across multiple accounts or portfolios without replicating legal agreements or onboarding processes.

The TBA futures market also supports a growing and active roll market, allowing participants to maintain forward exposure over time without re-entering bilateral contracts. This adds flexibility for long-term mortgage exposure and supports dynamic strategies that rely on rolling positions forward.

TBA futures reduce legal friction, improve execution‌ and scale across institutional portfolios. For many market participants, they offer a practical solution to the limitations of traditional TBA trading.

Given TBA futures are particularly well-suited for investors who have traditionally been sidelined from the TBA market, it’ll come as no surprise that TBA futures have seen strong uptake from firms that fall into this category, including: 

Separately managed accounts (SMAs): Firms managing SMAs must often allocate trades across dozens or hundreds of individual client portfolios, each with unique custodial arrangements and onboarding requirements. TBA futures allow for centralized execution and post-trade allocation without duplicating MSFTAs or custom agreements. A manager overseeing hundreds of accounts can use TBA futures to execute a single trade and allocate across portfolios, without setting up dozens of bilateral MSFTAs.

Mid-sized U.S. asset managers: Many mid-sized firms have fixed income expertise but lack the infrastructure to support a full bilateral trading operation. TBA futures offer scalable access via existing futures platforms and clearing brokers.

UCITS and European mutual funds: UCITS rules limit the use of certain  OTC contracts in some circumstances. TBA futures are listed, centrally cleared instruments, which enable agency MBS exposure without breaching these restrictions on certain OTC instruments .

Foreign institutional investors: Cross-border MSFTA issues, collateral constraints‌ and jurisdictional uncertainties make bilateral trading unattractive for many global investors. TBA futures provide standardized, recognized market access.

ETF providers: ETFs use TBA futures to manage subscriptions, redemptions‌ and rebalance operations while avoiding the friction and complexity of bilateral TBA relationships.

TBA futures are gaining traction as a standardized, transparent alternative to traditional bilateral TBA trading. The structure supports modern execution workflows and operational efficiency. As adoption expands, TBA futures are positioning themselves as a critical tool for MBS exposure, much like Treasury and SOFR futures in their respective markets.

Interested to see how TBA futures might fit your needs? Consider these next steps. 

• Visit our TBA futures landing page to access a host of product information and educational resources.
• Utilize our Mortgage Analytics to monitor market dynamics, duration‌ and convexity of TBA futures. Connect with a block market maker to explore bilateral execution options (100 lot block minimum).
• Let us know how we can help. Email us at interestrates@cmegroup.com to speak directly with a member of our product team.

1. Federal Reserve Bank of Philadelphia. "Working Paper 25-10." Accessed May 23, 2025. https://www.philadelphiafed.org/-/media/FRBP/Assets/working-papers/2025/wp25-10.pdf.