Risk Governance

ICE Clear Europe operates separate Risk Committees for Credit Default Swaps (CDS) and Futures and Options products.

The Futures and Options Risk Committee covers ICE's exchange traded energy markets (including ICE Endex energy derivatives) and the financial & soft commodity futures and options markets. The CDS Risk Committee covers European CDS products. In addition ICE Clear Europe also has a Board Risk Committee comprising both Member and customer representatives.

In their advisory role to the Board of ICE Clear Europe, the two product Risk Committees play a key role in ensuring that the Clearing House maintains and implements procedures, processes and controls that are designed to:

• Protect the integrity of the guaranty fund;
• Manage and mitigate credit and market risks;
• Consider applications for membership; and
• Review the clearing of new products

Risk Waterfall

Initial Margin Overview

* Please note that the 2-day MPOR for Energy contracts will apply from the point of EMIR authorisation onwards.

All risk models used by ICE Clear Europe are reviewed and subject to a formal model governance process that requires external independent validation. The suitability of all models is reviewed on an annual basis. Any material change to an existing model and all new models are also subject to independent model validation.

Parameters used within the models are reviewed and set by ICE Clear Europe Risk Management in accordance with policies agreed by the appropriate product Risk Committee. Initial Margin data is available on the Financial Resources section of our website.

Initial Margin

Futures & Options Initial Margin

Initial margin is a returnable deposit based on a member’s open positions. It is calibrated to be sufficient to cover the expected cost of closing out a defaulting Member’s position in normal market conditions to a 99% confidence interval. Model performance is monitored daily via both portfolio and contract level back-testing.

Members may be required to provide additional margin to cover concentration risk, illiquid positions or wrong way risk.

Changes to margin rates are notified via email to market participants as Circulars.

Credit Default Swaps (CDS) Initial Margin

The Credit Default Swaps (CDS) initial margin methodology provides portfolio risk coverage for Index and Single Name CDS products equivalent to, at least, a 5-day (7-day for client positions) 99.5% Value-at-Risk measure. The model performance is monitored via back-testing and via benchmarking against a Monte Carlo simulation framework.

Margin Rates

ICE Clear Europe has an agreement with the CME Group that permits the Clearing House to use SPAN4® for futures and options margin calculations. The policies and procedures used for the calculation of margin rates are approved by the Futures & Options Risk Committee. A list of permitted cover for Members, which can be lodged in respect of initial margin requirements, together with rate of return and/or charges, has been published. Margin calculations for ICE's European credit default swaps business are based on a separate methodology that uses a combination of two margin approaches: scenario-based stress tests and Monte Carlo simulations.

SPAN® is a registered trademark of Chicago Mercantile Exchange Inc., used herein under licence. Chicago Mercantile Exchange Inc. assumes no responsibility in connection with the use of SPAN.

Learn More

• SPAN for ICE Clear Europe
• ICE Clear Europe Risk FAQ

• Download SPAN for ICE Clear Europe Files

e-Learning Module

• Introduction to Margin

Futures and Options Guaranty Fund

In order to ensure that ICE Clear Europe has sufficient capital as one of the world's leading cross-asset clearing houses, ICE Clear Europe has established a mutualised guaranty fund which is based on stress testing results as required by EMIR Article 43. The Futures and Options (F&O) Guaranty Fund consists of two segments: energy segment and financials & softs segment. Each segment is calibrated to be sufficient to cover the potential cost of the simultaneous default of the two Member groups to which the Clearing House has the largest exposure to, under extreme but plausible scenarios.

The contribution of each Member to the F&O Guaranty Fund is recalculated quarterly and determined by each Member's average share of initial margin over the preceding quarter, with a minimum Member contribution of U.S. $ 1 million to the F&O Guaranty Fund.

In addition, ICE contributes U.S. $100 million to the ICE Clear Europe F&O Guaranty Fund, all of which sits in front of Members' obligations. Powers of Assessment can be used by ICE Clear Europe in addition to the F&O Guaranty Fund and are limited to twice the non-defaulting Members’ F&O Guaranty Fund contributions immediately preceding an event of default in respect of a single Member default (see Rule 909(c) (Powers of Assessment: F&O).

The adequacy of the F&O Guaranty Fund is monitored on a daily basis by ICE Clear Europe’s Risk Management Department and the level of both the energy segment and the financials & softs segment are reviewed by the F&O Risk Committee on a monthly basis.

The combined F&O Guaranty Fund requirement is shown on the financial resources section.

FUTURES AND OPTIONS GUARANTY FUND – APPLICATION OF F&O GUARANTY FUND ASSETS IN THE EVENT OF A DEFAULT

The order in which the F&O Guaranty Fund assets are applied in the event of a Member default are as follows:

1. The Defaulter’s initial margin. Including any ‘super margin’ such as concentration charge.
2. The full amount the Defaulter has contributed to the F&O Guaranty fund. This includes both the financials & softs segment contributions, regardless of which product set the Defaulter’s losses originated from.
3. ICE’s initial F&O Guaranty Fund contributions. ICE’s initial contribution to both the financials & softs segments will be consumed prior to the application of any non-defaulting Member’s contributions.
4. Non defaulting Members contributions and ICE’s pari passu contribution. Where the loss relates to financials & softs contracts, the financials & softs segment will be exhausted prior to the Member contributions to the energy segment, and vice-versa. Losses will be distributed on a pro-rata basis.
5. Powers of Assessment. Where losses relate to financials & soft commodity contracts F&O assessment contributions relating to the financials & softs segment will be applied and exhausted prior to assessment contributions relating to the Energy segment, and vice-versa.

Credit Default Swaps (CDS) Guaranty Fund

ICE Clear Europe has established a separate Guaranty Fund for European CDS that is sufficient to absorb the greatest combined uncollateralized loss resulting from the simultaneous default of two Members during periods of extreme market conditions where initial margin held in respect of the defaulting Member’s positions proves to be insufficient. The size of the CDS Guaranty Fund is based on levels of volatility and open positions.

The CDS Guaranty Fund is allocated between Members on a pro-rata basis corresponding to the uncollateralized stress losses of each individual Member. The CDS Guaranty Fund is covered in Euros with additional requirements in US Dollars in relation to Sovereign Single Name products.

The CDS Guaranty Fund requirement is shown on the financial resources page.



Back Testing

Futures and Options


Portfolio level initial margin is back-tested against the actual two-day* price changes to ensure that initial margin requirements are performing within the stated risk parameters. Back testing results are also presented to the Futures and Options Risk Committee on a monthly basis.

*One-day for energy products until EMIR authorisation

Credit Default Swaps (CDS)

Portfolio level back-testing is conducted daily and based on a 5-day margin period for House accounts and a 7-day margin period for client accounts. Back-test results are also distributed to the CDS Risk Committee weekly.



Back testing period: December 2013 onwards. Results calculated using the Basel traffic light test system as follows:



Default Management

In the event of a clearing Member default, the primary responsibility of the Clearing House is to contain the cost of closing out the Defaulter’s position to an amount less than the margin and guaranty fund contribution of the Defaulter.

This protects both the non-defaulting Members and the Clearing House from losses and by extension the markets that the clearing house provides clearing services to.

ICE Clear Europe has extensive powers under the Clearing Rules (Part 9: Default Rules) that allow it to perform this function. This includes details on events that could constitute an Event of Default.

The Clearing House will, on a best endeavours basis and where it is able to identify individual client positions and it does not compromise its duty to contain the Defaulter’s losses, assist clients of the Defaulter in the transfer of their positions to an alternative Member. Please note that, under the existing client account structure and relevant laws and regulations, individual clients margin monies cannot be ported at the same time as positions.

SPAN Overview

SPAN For ICE Clear Europe

SPAN* for ICE Clear Europe is a margin calculation tool that supports the calculation of original margin amounts for products cleared by ICE Clear Europe, based upon the SPAN algorithm.

All market participants and users, as well as others with an interest in understanding how ICE Clear Europe margins its products, are welcome to download and use the SPAN for ICE Clear Europe software. The software license can be found here and users are required to accept the terms of the license as part of the installation process. Users are not charged for use or download of the software, but there are limitations to using the software in commercial applications.

SPAN for ICE Clear Europe utilises the Microsoft.NET Framework, version 3.5. Users must install this program prior to installing SPAN. Download Microsoft .NET& here.

ICE SPAN User Guide

The following guide provides information on:

• Downloading the ICE SPAN software
• Using the ICE SPAN applications once downloaded
• Using ICE SPAN in batch mode
• An overview of the ICE SPAN margin reports
• A description of Net Liquidating Value (NVL) for premium paid up-front options

Download the Guide

Technical Requirements

• Windows Server 2003; Windows Server 2008; Windows Vista; Windows XP
• Microsoft .NET Framework version 3.5
• 400 MHz Pentium processor or equivalent (minimum); 1GHz Pentium processor or equivalent (recommended)
• 96 MB Memory (minimum); 256 MB Memory (recommended)
• Up to 500 MB of available hard disk space may be required (including .NET)
• 800 x 600, 256 colours Display (minimum); 1024 x 768 high colour, 32-bit Display (recommended)

Version 1.0.1.0	19 October, 2009
This major upgrade release provided support for the new SP5 and CSV formats of SPAN Array file utilised by ICE Clear Europe since 20th November 2009. This supported expansion in the range of inter-contract spreads applied by ICE Clear Europe and upgrade to this Version is required in order to properly calculate margin.

Version 1.0.1.2	20 January, 2010
This version rectifies a compatibility issue identified in version 1.010 relating to some Windows 64bit editions. This update is only required by users of Windows 64 bit editions.

Version 1.0.1.7	05 March, 2010
This maintenance release contains accumulated minor fixes to the core margining engine which most users will never encounter. Users are advised to upgrade to this version if they encounter any issues.

Version 1.0.1.2	21 July, 2010
This version rectifies a compatibility issue identified in version 1.010 relating to some Windows 64bit editions. This update is only required by users of Windows 64 bit editions.

Version 1.0.1.8	02 September, 2010
This version contains fixes to the calculation of inter-commodity spreads and inter-month spreads. For certain portfolios these may be calculated incorrectly (albeit rarely) depending upon the set up of inter-month charges and inter-commodity credits.

Version 1.0.1.10	08 December, 2010
This version introduces the "Use Nearest Strike" feature that allows use of a SPAN array for an alternate strike to be used when margining option positions for which no SPAN array is present. Refer to the User Guide (above) for further details.

Version 1.0.2.2	12 May, 2011
This version supports the introduction of the positional allocation processing methodology that will be utilised by ICE Clear Europe as of 8 July 2011. All users must upgrade to this updated version prior to 8 July 2011 in order to properly calculate original margin from 8 July 2011. This version of the software is completely backwardly compatible with the existing margin approach.

Version 1.0.2.3	16 September, 2011
This version supports some minor bug defects. If you encounter issues with a prior version, upgrade to this version.

Version 1.0.3.1	15 November, 2011
This version supports Windows 7, 64 bit editions.

Version 1.0.3.3	16 March, 2012
This version supports calculation and reporting of the new Volatility Credit for Energy Options contracts. This version is compatible with Energy and FX SPAN Arrays.

Version 1.0.3.4	17 April, 2012
This version contains a fix to the Inter-contract Credit report and the display of volatility credits. This version is compatible with Energy and FX SPAN Arrays.

Version 1.0.3.6	10 May, 2012
This version ignores the new Margin Ratio Record (Record Type 36) and contains some minor report enhancements. This version is compatible with Energy and FX SPAN Arrays.

Version 1.0.4.0	25 May, 2012
This version of SPAN for ICE supports processing and reporting of additional margin requirements in accordance with the new Margin Ratio Record (Record Type 36) and contains some report enhancements. This version is compatible with Energy and FX SPAN Arrays.

Version 1.3.0.6

16 September, 2013

This version of SPAN for ICE supports the capping of Weighted Futures Price Risk. When calculating margin for ICE Energy products, this must be enabled in order to replicate the Clearing House margin computation. (Menu Tools-> Apply WFPR Cap). Note that when using SPAN for ICE to compute margin for NYSE Liffe products, this should not be enabled. This version has other new features and you should refer to the User Guide for more information.

Version 1.3.2.1

21 November, 2013

This version of SPAN for ICE supports the introduction of the new Clearing House Margin Ratio (defined within the SPAN Array Record 37) and which may be utilised as a means of applying an add-on margin to be collected by the Clearing House. This is being introduced specifically to address the EMIR requirement that Clearing Houses take account of pro-cyclical market conditions within the margin collected by the Clearing House. Note that ICE Clear Europe will not introduce the Record 37 into its array files (for ICE Energy of Liffe products) until January 2014 and further, the ratio will be defined as 1.0 (i.e. no additional margin) until such time that the Clearing House determines introduction of this add-on to be necessary. Users should also note that SPAN for ICE should be used in place of the NYSE Liffe PRMC tool as PRMC will not be enhanced to accommodate the new Record 37.

Version 1.3.2.3	15 January, 2014
This version of SPAN for ICE has improved compatibility with the SP4 format of SPAN Arrays currently published for NYSE Liffe. This version now supports the inclusion of the new record 37 within the SP4 format. All users that make use of the NYSE Liffe SPAN array are advised to upgrade to this version.

Version 1.3.4.0	4 July, 2014
Updates to the web site links on the Favourites menu (e.g. for downloading SPAN arrays) to make these compatible with the re-launched ICE web site.

Version 1.3.4.3	10 November, 2014
This update addresses a defect whereby SPAN for ICE does not always calculate the correct margin when all ICE Clear Europe SPAN array files, i.e. ICE Energy (IPE Arrays) and ICE financials products (LIF, OPT and FOX arrays) are loaded at the same time. This update addresses this shortcoming.

Version 1.4.1.0	10 August, 2015
Following the introduction of Weighted Futures Price Risk caps on Financials and Softs SPAN inter-contract credits all ETD contracts cleared by ICEU are now subject to WFPR caps. This version of SPAN for ICE enables the WFPR cap feature by default.

Version 1.4.1.4

03 November, 2015

Previous versions of SPAN for ICE write log information to the same directory as that in which the programme is installed. This means that users that do not have the appropriate permissions will find that they are unable to access the log file information. The log information is helpful in identifying any errors that may have occurred when margining positions etc. For example, it identifies any positions that were not margined and why. In this, the latest, version of SPAN for ICE, the log file is written to the user’s documents directory (My Documents \ ICE SPAN) where it can be written to and accessed without problem. The Log file can be viewed from the program menu bar, see View->Log File.

Version 1.4.1.5	26 November, 2015
This version of SPAN for ICE contains a fix to the calculation of Spot Charges. Spot Charges are used by ICE Clear Canada and anyone experiencing issues with the Spot Charge should upgrade to this version. Note that this does not affect other ICE Clearing Houses and there is no immediate need to upgrade if you only use SPAN for ICE for ICE Clear US, ICE Clear Europe or ICE Clear Singapore.

• DOWNLOAD VERSION 1.4.1.5 (RELEASE DATE 26 NOVEMBER, 2015)
Note for users of NYSE Liffe PRMC: Support for the PRMC margining tool has been withdrawn, anyone still using PRMC is strongly advised to upgrade to SPAN for ICE.
Please note that ICE will not be supporting use of the fixed format SP6 array files (used for FX) or any future fixed format array files with SPAN for ICE. Existing fixed format array files (SP3, SP4, SP5, PA5) will continue to be supported. ICE will continue to publish all fixed format files for use by Members and Vendors, but users of SPAN for ICE are advised to make use of the CSV format arrays.