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Registered name: ICE Clear Europe Limited, (Registered in England, No. 06219884)

Registered office: Milton Gate, 60 Chiswell Street, London EC1Y 4SA, United Kingdom

ICE Clear Europe Ltd is a recognised clearing house under the Financial Services and Markets Act 2000 and is supervised by the 

Bank of England.

November 16, 2023

Mr. Christopher J. Kirkpatrick

Office of the Secretariat

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, NW

Washington, DC 20581

Re: ICE Clear Europe Self-Certification Pursuant to Commission Rule Rule 40.6 

– Futures and Options Risk Policy

Dear Mr. Kirkpatrick:

ICE Clear Europe Limited (“ICE Clear Europe” or the “Clearing House”), a registered 

derivatives clearing organization under the Commodity Exchange Act, as amended (the 

“Act”), hereby submits to the Commodity Futures Trading Commission (the 

“Commission”), pursuant to Commission Rule 40.6 for self-certification, an updated

Futures and Options Risk Policy (the “Policy”). The Policy will replace the existing 

Futures and Options Risk Policy in its entirety, and will also replace the existing Futures 

and Options Guaranty Fund Policy and Futures and Options Stress Testing Policy, 

which are being retired. 1 The amendments will become effective on the first business 

day following the tenth business day after submission, or such later date as ICE Clear 

Europe may determine. 

Concise Explanation and Analysis

ICE Clear Europe is adopting an updated Futures and Options Risk Policy, which will, 

among other matters, incorporate relevant discussions of the F&O Guaranty Fund and 

F&O stress testing policies, and improve clarity and consistency of descriptions of 

relevant risk policies. The amendments generally will not result in a change in Clearing 

House requirements relating to F&O risk management, as the content of the Policy

remains appropriate and reflective of ICEU’s practices. In connection with the adoption 

1 Capitalized terms used but not defined herein have the meanings specified in the Policy or, if not 

defined therein, the ICE Clear Europe Clearing Rules. 
2

Registered name: ICE Clear Europe Limited, (Registered in England, No. 06219884)

Registered office: Milton Gate, 60 Chiswell Street, London EC1Y 4SA, United Kingdom

ICE Clear Europe Ltd is a recognised clearing house under the Financial Services and Markets Act 2000 and is supervised by the 

Bank of England.

of the new Policy, ICE Clear Europe will also retire its existing Futures and Options

Guaranty Fund Policy and the Futures and Options Stress Testing Policy, the substance 

of which is now subsumed in the Policy.

The Policy includes a summary of the overall purpose and scope of the Policy, as 

establishing requirements for the management of contingent market risk as aligned to 

the Board risk appetite. The Policy will also establish the minimum risk standards as it 

relates to the level of financial resources for the Futures and Options (“F&O”) clearing 

business, including Variation Margin, Initial Margin, additional Margin, Guaranty 

Fund, and Skin-in-the-Game. The revised Policy also includes a statement of ICE Clear

Europe’s existing three lines of defense model for managing risk. 

The Policy summarizes the overall requirements for Variation Margin used to manage 

the current mark-to-market loss in the Clearing Member portfolios, including the 

process for calculation of end-of-day mark-to-market value for proprietary and client 

accounts, as well as intraday monitoring of exposure. The Policy also reflects that 

Variation Margin must be based on reliable and readily available pricing data, and if 

not reliable or readily available, the systems or models used to derive prices must be 

from approved sources and documented accordingly. 

The Policy also summarizes the overall requirements for Initial Margin, including initial 

margin calibration. The Policy reflects current practice that Initial Margin must be 

calibrated to a confidence interval of at least 99 percent in normal market conditions, 

and must be based on data capturing historical volatilities of prices and implied 

volatilities for options based on representative data covering at least the previous 12 

months (or 250 business days) and including historical volatilities covering periods of 

stress. The Initial Margin must also capture basis risk. The Policy will also list the

cumulative conditions for allowing offsets or reduction in margin requirement based on 

correlations between different instruments. 

The Policy addresses the applicable Margin Period of Risk for the Initial Margin 

calculation, which may be 1 day or 2 days depending on the product and account class. 

The Policy also reflects the measures used to limit the procyclicality of Initial Margin, 

specifically that the Clearing House must include at least one of the following: a buffer 

of at least equal to 25 percent of the calculated margins, at least a 25 percent weight to 

stressed observations in the parametrization of the margin rate, or margin requirements 

that are not lower than those that would be calculated using volatility estimated over a 

10-year historical lookback period. 

The Policy also describes ICE Clear Europe’s practices with respect to Initial Margin 

Back Testing with respect to products and Clearing Member portfolios to assess margin 

coverage and with respect to spreads where Initial Margin requirements are based on 

spread margin rates. 

The Policy outlines the use of additional margin requirements to mitigate the risks 

beyond those arising from market movements and covered by the base Initial Margin
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Registered name: ICE Clear Europe Limited, (Registered in England, No. 06219884)

Registered office: Milton Gate, 60 Chiswell Street, London EC1Y 4SA, United Kingdom

ICE Clear Europe Ltd is a recognised clearing house under the Financial Services and Markets Act 2000 and is supervised by the 

Bank of England.

calculation. This would include requirements for Concentration Risk, Specific WrongWay Risk, additional Credit Risk, Delivery Risk, among other potential risks. 

The Policy addresses the establishment of sensitivity tests and analysis to assess the 

margin model under a range of parameter values at least monthly, and more frequently 

depending on market conditions. 

The Policy reflects the procedure for calculation and communication of margin 

requirements at least once each business day, and the procedures for payment of margin 

under the existing Finance Procedures. The Policy also addresses intraday monitoring 

of exposure and establishment of intraday exposure limits at the individual account level 

and aggregated at the Clearing Member level for purposes of making intraday margin 

calls.

The Policy also includes a section on the Guaranty Fund requirements, incorporating 

the substance of the current F&O Guaranty Fund Policy (which is being retired). The 

Policy summarizes the purpose and sizing of the Guaranty Fund, reflecting the existing 

requirements of the Rules and Finance Procedures. Specifically, the size of the Guaranty 

Fund must be sufficient to cover at least a default of the two Clearing Members groups 

to which the Clearing House has the largest exposures under extreme but plausible 

market conditions. Consistent with the Rules and Finance Procedure, the Guaranty 

Fund is apportioned to the Energy and Financials & Softs segments. The Policy also 

addresses the procedures for periodic review of the Guaranty Fund and required 

contribution levels for Clearing Members. 

The Policy also outlines overall practices relating to stress testing and reverse stress 

testing of financial resources in light of Clearing Member portfolios. Stress testing is 

intended to ensure that financial resources are sufficient to cover losses that exceed 

margin requirements and to identify when the financial resources may provide 

insufficient coverage of credit exposures. The stress testing framework requires 

identifying extreme but plausible market conditions, based on both historical and 

theoretical scenarios. The stress test scenarios must include all asset classes and cleared 

contracts. The Policy also address annual review of the stress testing framework and 

the set of stress scenarios. The Policy describes the objectives of reverse stress testing, 

which is to identify market conditions (beyond those that are extreme and plausible) 

under which resources may provide insufficient coverage. Reverse stress testing must 

be performed at least quarterly, or more frequently depending on market condition. 

The Policy also addresses the use of additional Stress Margin to cover the Clearing 

Members’ uncollateralized stress losses beyond the CCP’s prefunded resources, to 

ensure that the combination of Margin and Guaranty Fund requirements are sufficient 

to cover the default of at least the two Clearing Members with the largest exposures to 

the Clearing House under extreme but plausible market conditions. The Policy also 

states that procedures must be in place for triggering an extraordinary review of the 

Guaranty Fund size when Stress Margin is called. 
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Registered name: ICE Clear Europe Limited, (Registered in England, No. 06219884)

Registered office: Milton Gate, 60 Chiswell Street, London EC1Y 4SA, United Kingdom

ICE Clear Europe Ltd is a recognised clearing house under the Financial Services and Markets Act 2000 and is supervised by the 

Bank of England.

The Policy also generally outlines the Clearing House’s own contribution to default 

resources (Skin-in-the-Game) and the waterfall of use of default resources provided for 

in the Rules. 

The Policy sets out certain requirements where the production margin requirements 

deviate from the model-driven requirements, including procedures for updating 

production Initial Margin requirements within a defined period if the model-driven 

requirement exceeds the production level by more than a specified threshold. The 

Policy also addresses governance requirements for margin deviations. Non-significant 

deviations must be approved by the Model Oversight Committee and significant 

deviations will require additional Board notification. 

Finally, the Policy describes procedures for ongoing periodic review of the Policy, 

breach management, exception handling and document governance, in a manner 

generally consistent with other ICE Clear Europe policies. The Policy identifies relevant 

personnel responsible for ensuring that the Policy remains up-to-date and reviewed in 

accordance with the Clearing House’s governance processes. Document reviews will 

encompass at the minimum regulatory compliance, documentation and purpose, 

implementation, use and open items from previous validations or reviews. Results of 

the review will have to be reported to the Executive Risk Committee along with the 

priority of findings, proposed remediations and target due date to remediate the 

findings. Any changes to the Policy will have to be reviewed by the Executive Risk 

Committee, followed by review by the Client Risk Committee to recommend for Board 

approval. 

Compliance with the Act and CFTC Regulations

The amendments to the Policy are potentially relevant to the following core principles:

(B) Financial Resources, (D) Risk Management, and (O) Governance, and the 

applicable regulations of the Commission thereunder.

• Financial Resources. As discussed above, the amendments would update the 

overall descriptions of the Clearing House’s practices relating to Variation and 

Initial margin requirements. The amended Policy also incorporates Guaranty 

Fund sizing (including the process for reviewing and adjusting the size of the 

F&O Guaranty Fund). The amendments are not intended to result in changes 

in those practices or in Margin or Guaranty fund levels, but are intended to 

improve document clarity. As such, the amendments are consistent with the 

Clearing House’s maintaining of sufficient financial resources to cover its 

exposures with a high degree of confidence. Therefore, in ICE Clear Europe’s 

view the amendments satisfy the requirements of Core Principle B and 

Commission Rule 39.11.

• Risk Management. As stated above, the Policy outlines the minimum risk 

standards that the Board expects to be met in relation to the level of financial 

resources required for the F&O clearing business to protect against potential 

losses. Furthermore, the Policy outlines the methodology for collecting Initial 
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Registered name: ICE Clear Europe Limited, (Registered in England, No. 06219884)

Registered office: Milton Gate, 60 Chiswell Street, London EC1Y 4SA, United Kingdom

ICE Clear Europe Ltd is a recognised clearing house under the Financial Services and Markets Act 2000 and is supervised by the 

Bank of England.

and Variation, and various types of additional Margin, in order to adequately 

protect the Clearing House against a variety of possible risks. The Policy also 

outlines overall practices relating to stress testing and reverse stress testing to 

ensure ICE Clear Europe can sufficiently cover losses in extreme but plausible 

market conditions. The amendments thus enhance the Clearing House’s 

overall risk management, consistent with the requirements of Core Principle D 

and Commission Rule 39.13.

• Governance. The Policy identifies responsibilities of the Board and relevant 

committees and personnel in relation to oversight of the Clearing House’s

management of default risk. The Policy also provides for annual review to

ensure that it remains up-to-date and is reviewed in accordance with the 

Clearing House’s internal governance processes. ICE Clear Europe believes 

that the amendments are therefore consistent with the governance 

requirements of Core Principle O and Commission Rule 39.24.

As set forth herein, the amendments consist of the adoption of the new Futures and 

Options Risk Policy and the retirement of the existing Futures and Options Guaranty 

Fund Policy and Futures and Options Stress Testing Policy. ICE Clear Europe has 

requested confidential treatment with respect to the new Policy, which has been 

submitted concurrently with this self-certification submission.

ICE Clear Europe hereby certifies that the amendments comply with the Act and the 

Commission’s regulations thereunder. 

ICE Clear Europe received no substantive opposing views in relation to the 

amendments.

ICE Clear Europe has posted a notice of pending certification and a copy of this 

submission on its website concurrent with the filing of this submission. 

If you or your staff should have any questions or comments or require further 

information regarding this submission, please do not hesitate to contact the undersigned 

at George.milton@theice.com or +44 20 7429 4564. 

Very truly yours,

George Milton

Head of Regulation & Compliance