ICE NGX Canada Inc.

Suite 2610, 225 – 6

th Avenue SW

Calgary, AB

Canada T2P 1N2

ngx.com

ice.com

1

FOIA CONFIDENTIAL TREATMENT REQUESTED

April 21, 2023

VIA CFTC PORTAL

Christopher J. Kirkpatrick

Office of the Secretariat

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st St., N.W.

Washington, D.C. 20581

Re: Amendment to ICE NGX Canada Inc. Rules - Submission Pursuant to Section 

5c(c)(1) of the Commodity Exchange Act and CFTC Regulation § 40.6(a)

Dear Mr. Kirkpatrick:

Pursuant to Section 5c(c)(1) of the Commodity Exchange Act, as amended, (“Act”) and 

Commodity Futures Trading Commission (“Commission”) Regulation 40.6(a), ICE NGX Canada 

Inc. (“ICE NGX”) is submitting this self-certification of amendments to the ICE NGX Risk 

Management Framework (“RMF”). The RMF is a “rule” as that term is defined under Commission 

Regulation 40.1(i). ICE NGX intends to implement these amendments between June 1 and June 

15, 2023, or on such later date as ICE NGX may designate.

1. Overview 

ICE NGX is making this submission to implement certain changes (the “Amendments”) to the ICE 

NGX RMF to refine the methodology for calibrating the seasonality factor in the Shortfall Margin 

(“SFM”) calculation.

2. Details of Rule Changes

Shortfall Margin

As Commission staff is aware, ICE NGX calculates and applies SFM, as an add-on component 

of initial margin, to mitigate against the risk of Contracting Parties, as aggregated by clearing 

accounts, from building up exposure beyond their credit capacity. ICE NGX stress tests each 

clearing accounts’ portfolio to measure the uncollateralized exposure, i.e., the amount by which 

the stress testing value exceeds base IM requirements. ICE NGX then collects SFM in the 

amount, if any, by which the uncollateralized stress exposure exceeds the clearing account’s 

“Shortfall Allowance”, which is the permitted amount of uncollateralized stress exposure allocated 

to the clearing account. 
 

ICE NGX Canada Inc.

Suite 2610, 225 – 6

th Avenue SW

Calgary, AB

Canada T2P 1N2

ngx.com

ice.com

2

ICE NGX’s stress testing for the purposes of SFM incorporates a seasonality factor. The 

seasonality factor is designed to reflect long term volatility patterns in the natural gas and power 

markets in North America, in order to more efficiently margin Contracting Parties’ portfolios and 

exposures.

ICE NGX is refining the methodology for calibrating the seasonality factor in stress testing for 

SFM purposes to follow a more standard and straightforward methodology.

No other changes to stress testing

ICE NGX is not making any changes to its stress testing for the purposes of calculating and 

monitoring financial resources

3. Compliance with Core Principles

ICE NGX reviewed the Amendments and determined that they comply with the rules and 

regulations of the Commission. In this regard, ICE NGX reviewed the derivatives clearing 

organization (“DCO”) core principles (each a “Core Principle”) and determined that the 

Amendments are potentially relevant to the following Core Principles and applicable regulations 

of the Commission thereunder. 

Compliance (Core Principle A): The Amendments are consistent with Core Principle A -

Compliance and Commission Regulation 39.10, as the Amendments clarify, enhance and update 

ICE NGX’s policies and procedures for complying with Commission regulations and internal 

policies.

Risk Management (Core Principle D): The Amendments are consistent with Core Principle D -

Risk Management and the following Commission Regulations:

 § 39.13(a), as the Amendments refine ICE NGX’s Shortfall Margin practices, which help 

to enable ICE NGX to manage the risks associated to it through tools and procedures 

appropriate to the North American energy markets for which it provides clearing services;

 § 39.13(b), as the Amendments update ICE NGX’s risk management framework to reflect

changes to risk management practices;

 § 39.13(e), as the Amendments refine ICE NGX’s practices for measuring credit exposure 

to each clearing participant;

 § 39.13(g)(1), as the Amendments standardize the calibration of the seasonality factor for 

the purposes of Shortfall Margin to reflect a risk-based approach to this initial margin 

requirement;

 § 39.13(g)(3), as the Amendments reflect a change to ICE NGX’s SFM model that has 

been independently validated;
 

ICE NGX Canada Inc.

Suite 2610, 225 – 6

th Avenue SW

Calgary, AB

Canada T2P 1N2

ngx.com

ice.com

3

 § 39.13(f)(1), as the Amendments enhance ICE NGX’s application of Shortfall Margin, a 

margin requirement designed to limit its exposure to potential losses from a default by a 

clearing participant, to better ensure that a non-defaulting clearing participant is not 

exposed to losses that the non-defaulting clearing participant cannot anticipate or control; 

 § 39.13(h)(3)(i), as the Amendments enhance the calibration of the seasonality factor in 

ICE NGX’s stress testing and practices for the purposes of SFM.

4. Certifications

ICE NGX certifies that the proposed Amendments discussed in this submission comply with the 

Commodity Exchange Act, including the Core Principles and the Regulations of the Commission 

thereunder. ICE NGX is not aware of opposing views expressed regarding these amendments. 

ICE NGX further certifies that, concurrent with this filing, a copy of this submission was posted to 

ICE NGX’s website.

If you have any questions or require further information, please do not hesitate to contact me at 

403-479-4639 (mobile) or martin.mcgregor@ice.com. 

Yours truly,

__________________________

Martin McGregor

General Counsel & CCO

ICE NGX Canada Inc.