A mechanism was not in place initially during the war to exchange prisoners.  President Lincoln, at first, refused to establish a system.  He felt doing so would recognize the Confederacy government as a legitimate power and he rationalized that the Confederacy held no wartime rights.
    After the Federal debacle at First Manassas, the United States Congress put pressure on the Lincoln Administration to establish a formal exchange system.
    The first exchanges of prisoners took place during February 1862 but the formal cartel was not established until 22 July 1862.  Prior to this time, exchanges were usually arranged by local field commanders just after engagements took place.
    The formal cartel was established by Confederate General Daniel Harvey Hill and Federal General John A. Dix (known as the Dix-Hill Cartel).  Developed from long standing customs of war the understanding was usually a gentlemen's agreement.  The premise of the cartel stated that soldiers would be exchanged within ten days and, if not, could be released upon signing a pledge or parole.
    The cartel was often paralyzed by paperwork and both sides suspending exchanges for various reasons.  The final breakdown took place as a result of the Confederacy's refusal to treat captured fugitive slaves turned soldiers as prisoners of war.  In May of 1863, U.S. Grant also agreed not to exchange prisoners later in the war because he knew the Confederates often returned to their units to fight.  This was also a result of him being criticized in the Union newspapers after the parole of the 31,600 prisoners of Vicksburg.
    The absence of an exchange program resulted in numerous deaths and barbaric conditions in both Northern and Southern prisoner of war camps.  It also had the desired effect of depriving the Southern Armies of soldiers but at the cost of thousands of dead Federal prisoners of war in overcrowded, ill supply Southern prisons.  Grant did authorize the exchange of prisoners again in January 1865, however, he directed only disabled soldiers be exchanged so they would not be useful to the Confederacy.
    The Official Records has eight volumes relating to the negotiations, correspondence, exchanges, and prisoners of war as a whole.  These negotiations and exchanges took place usually at City Point, Virginia (present day Hopewell).  The officials on both sides would sit on a steamer in the James River and pass list of names and make arrangements on exchanges.  Below is the basic formula of exchange of prisoners.

Officers of Equal Ranks
NonCommissioned Officers of Equal Rank
Privates for Privates
1 General = 46 Privates
1 Major General = 40 Privates
1 Brigadier General = 20 Privates
1 Colonel = 15 Privates
1 Lieutenant Colonel = 10 Privates
1 Major = 8 Privates
1 Captain = 6 Privates
1 Lieutenant = 4 Privates
1 NonCommissioned Officer = 2 Privates

    The enmasse surrender at Vicksburg almost paralyzed the Federal logistical system.  U.S. Grant justified, and rightfully so, that he logistically could not feed, transport, and guard the surrendered forces of General Pemberton.  He felt that many of the parolees would desert or were in such poor condition they would be unable to return to duty.  Lieutenant Colonel J.F.B. Jackson who was commanding at the parole on 8 July 1863 certified he had 33 officers, and 521 enlisted men (1 Colonel, 1 Major, 11 Captains, 20 Lieutenants, 60 N-Commissioned Officers, and 461 Enlisted Men).  Press here for a search of Vicksburg Parolees.  Below is 1st Lieutenant Francis Daniel's (Company D) parole.  He was my great-great grandfather's uncle.
Prisons, Paroles, and Exchange