1

ICE Clear Europe Limited

Registered in England No.06219884

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

September 13, 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 Procedures Amendments

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, amendments 

to its Futures and Options Risk Procedures (the “F&O Risk Procedures” or 

“Procedures”) to make certain updates and clarifications relating to risk management 

for the F&O product category, including to reference the Clearing House’s Model Risk 

Policy and update the Document Governance and Exception Handling provisions.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 amending its Futures and Options Risk Procedures to make various 

updates and clarifications, including to add a section describing the existing F&O 

Guaranty Fund, make reference to the recently revised Model Risk Policy, and update 

the Document Governance and Exception Handling language. Various non-substantive 

drafting changes and improvements will be made throughout the document. The 

1 Capitalized terms used but not defined herein have the meanings specified in the F&O Risk 

Procedures or, if not defined therein, the ICE Clear Europe Clearing Rules.
2

ICE Clear Europe Limited

Registered in England No.06219884

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

amendments generally do not represent a change in the Clearing House’s practices, but 

rather are intended to improve and clarify the documentation of existing risk 

management practices.

In the purpose section of the document, the amendments will clarify that details of 

models described in the Procedures (in addition to processes) are included in the 

relevant model methodology and procedure documentation. The amendments will

further provide that any changes to the risk parameters will be subject to the governance 

set out in the Model Risk Policy. The amendments will also make non-substantive 

clarifications to the description of the role of ICE Clear Europe as a central 

counterparty. 

The revised Procedures will simplify the description of Clearing Member groups and 

clarify that Clearing Members in the same Member Group may be based in various 

jurisdictions rather than specifically referencing a Clearing Member in Europe and 

another part of the world. The amendments will also make clear that in order to perform 

exposure analysis at appropriate levels of aggregation, the Clearing House associates 

its Clearing Members in Member Groups. Additional language regarding how Member 

Groups are identified and the internal groups responsible for the membership 

onboarding process will be removed as unnecessary. 

The amendments will also simplify and clarify the discussion of the various types of 

proprietary and client margin accounts made available to its Clearing Members (which 

are established pursuant to the published Rules and Clearing Procedures and are not 

being changed by virtue of these amendments). The amendments will state more simply 

that the Core IM is calculated on either a “Gross” or “Net” basis dependent upon the 

type of margin account. (As an exception, the chart detailing the margin accounts is 

being revised to change the Core IM Method for the Individual Client (ISOC) accounts 

(I) and (J) from Net to N/A, as the net/gross distinction is not applicable for such 

accounts). Various conforming changes will be made to the summary of the accounts, 

including to reflect that the house account (H) is margined on a net basis, as was already 

reflected in the chart. Additional clarifications will be made that accounts are margined 

on a net or gross basis (rather than a net and gross basis). The amendments will also 

explain more concisely that information as to Money Rules and FCM/BD customer 

applicability is included in the table to distinguish account types. A footnote will also 

be added to provide an ICEU EMIR Disclosure Statement that supplies further details 

on the margin account types. 

The amendments further clarify the distinction between the net and gross calculations 

of initial margin in light of Commission and Bank of England/EU requirements. The 

amendments note that the net margin methodology for customer accounts uses a twoday margin period of risk (MPOR), whereas the gross margin methodology for 

customer accounts uses a one-day MPOR (and that EU rules treat the one-day MPOR 

gross margin calculation under Commission rules as equivalent to the two-day MPOR 

net margin calculation). The amendments also make non-substantive drafting 

clarifications to the discussion of net and gross margin methods. The amendments add 

a statement that house and proprietary affiliate positions of a clearing member are 

calculated using a minimum two-day MPOR. The amendments reflect existing practice 

and will not change the manner of calculation of initial margin for any accounts. The 
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ICE Clear Europe Limited

Registered in England No.06219884

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

amendments will remove as unnecessary language referencing ICE Clear Europe 

setting up multiple customer accounts to cater for ESMA and Commission

requirements. 

The amendments will clarify that ICE Clear Europe performs position keeping of all 

positions belonging to each account of both clearing members and non-clearing 

members (defined as members of ICE exchanges that are not clearing members). The 

changes will also clarify that for gross margined accounts, the Clearing House relies on 

a gross client margin file provided by the clearing member for purposes of position 

management and calculation of gross initial margin. The changes also address 

reconciliation of the gross client margin file against actual positions in the relevant 

account and margining of any inconsistencies. These amendments do not represent a 

change in current practice by the Clearing House. 

The amendments will specify that the Clearing Risk Department is the owner of the 

Procedures document and remove references to the F&O Market Risk team. 

The discussion of initial margin will be revised for greater simplicity and clarity and 

are not intended to change the substance of the calculation of initial margin, which is 

set forth in the existing applicable model documentation for the ICE Risk Model. The 

amendments will clarify that initial margin consists of Core IM and Additional IM to 

mitigate the risk it is exposed to on all Futures and Options positions. The amendments 

will also clarify that the Procedures provide detail to each of the IM components 

(removing unnecessary references to frequency, limits and thresholds, exceptions and 

escalation). 

The amendments will clarify that the ICE Risk Model uses margin rates in computing 

Core IM and these margin rates are the responsibility of the Clearing Risk Department. 

A reference to a specific version of the IRM Margin Rate Calibration Model 

Documentation will be deleted as unnecessary and computation of the model margin 

rates, as opposed to calibrated margin rate, will be inserted above the table detailing the 

computation. The table of standard settings for the computation of model margin rates 

(referred to as the “Autopilot rates”) will be simplified, removing rows labeled 

“System/Process”, “Test/Frequency”, and “Exceptions” as unnecessary, and removing 

references to specific Energy and Financial & Softs sectors. Likewise, the Margin 

Period of Risk will be summarized as 1 day or 2 days depending on the product, 

consistent with the discussion above. The summary of the lookback period will be 

revised from at least 100 days to VaR that is at least as conservative as that based on a 

250-day lookback. The Anti-Procyclicality element description will be amended to be 

at least 25 percent stressed volatility (rather than exactly 25%). The row on Risk 

Parameters will be replaced with a summary of the output of the risk model. 

The amendments will clarify the process for review and promotion of production 

margin rates. The amendments reflect that the review of the production margin rate is 

performed versus trigger criteria daily (as opposed to quarterly). As a result of the daily 

updates, a reference to ad hoc updates in addition to quarterly reviews will be deleted 

as it is no longer required. The amendments will address that that production margin 

rates are set to the Autopilot model rates at a specific point in time after each review 

through a process called promotion. It will further state that the production rates are the 
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ICE Clear Europe Limited

Registered in England No.06219884

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

margin rates used in the calculation of Clearing Member’s Core IM requirements. The 

steps to review and the promotion of the proposed production margin rates will include 

mention of their promotion. The steps will also be simplified to state that first the 

update to the production margin rates is proposed and reviewed by the Clearing Risk 

Department, then the Clearing Risk Department seeks approval for the margin update. 

Then once approved, the Clearing Risk Department promotes the margin rates into the 

Risk System, followed by informing the Clearing Members and wider market of the 

new margin rates by means of the Clearing House’s website. The amendments will add 

that typically one business day’s notice is given to the market from the date of the 

circular, and the Clearing Risk Department will then upload the approved margin rates 

to the ICE Clear Europe website upon publication of the circular.

A cross-reference to documentation relating to ICE Risk Model parameters will be 

updated to include a general reference to the ICE Risk Model documentation instead of 

an outdated version. Details on certain parameters relating to EWMA volatility and 

APC stress volatility will be removed as they are addressed in the ICE Risk Model 

documentation. The amendments will add another new sub-section on the ICE Risk 

Model Daily Requirements that will outline the process for computing Core IM as part 

of the End of Day process. This will include computation of the ICE Risk Model daily 

margin requirements and EMIR Add-on for each Clearing Member margin account. 

The related table with the summary of products eligible under each margin account will

change the I and J Accounts to N/A as opposed to Net margining type. The footnote 

will explain that for these accounts the sub-clients within the client account are 

individually (rather than net) margined. Any material change in Core IM will be 

escalated to Operations, instead of the previous plus or minus 5 percent escalation 

threshold. This section will also reference a summary of the IRM Margin Rate 

Promotion and Core IM processes that will be added in the Appendix to the Procedures. 

These changes are consistent with existing margin practice but are intended to 

document the current process more clearly.

In terms of additional IM, the amendments will specify that such amounts are to 

collateralize risks not captured by the Core IM amount. Clarifications will be made to 

the descriptions of various types of additional IM, as discussed herein. For example,

amendments will clarify that the additional risk from concentrated positions is covered 

through a Concentration Charge add-on, and that the additional margin is called on a 

t+1 basis to be met the following day. The requirement will clarify the notice process 

for additional IM through the MFT system, remove an outdated reference to EoD 

reporting and remove unnecessary distinctions between concentration charges for 

different product segments. The summary table of the Concentration Charge process 

will be deleted, and relevant terms moved to the added Appendix. In the Parameter 

Calibration section, the amendments will remove the existing discussion and add 

instead that the details of the Concentration Charge model or risk parameters will be 

described in the relevant Concentration Charge model documentation. 

In the Stress Margin section, the amendments will add a general description of the stress 

loss charge as ensuring that sufficient pre-funded resources to ensure regulatory 

compliance are held at all times. The amendments will also clarify that any Stress Loss 

Charge top-up requirements is called via an intraday call on a t+1 basis so that, for 

example, positions as of the end of day on Monday could incur additional margin called 
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ICE Clear Europe Limited

Registered in England No.06219884

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

on Tuesday for receipt on Tuesday. The amendments will clarify that the total Stress 

Loss Charge is posted in the end of day additional margin requirement so that any 

surplus or deficit is part of the end of day margining. The summary of the Stress Loss 

Charge process will be deleted, and relevant terms moved to the added Appendix. 

Additional details of the Stress Loss Charge model and risk parameters will be removed, 

and a cross-reference added to the Futures and Options Guaranty Fund model 

documentation (which addresses such parameters). An incorrect cross-reference to the 

F&O Stress Testing Policy will be removed. 

In the Shortfall Margin section, the amendments will specify that Shortfall Margin is 

called to cover uncollateralized stress loss (as calculated at the margin account level). 

The amendments will also state that Shortfall Margin is called on a t+1 basis to be met 

on the following day, so that, for example, positions on Monday EOD can incur 

additional margin called on Tuesday for receipt on Wednesday morning. The 

amendments will delete unnecessary provisions relating to the posting of the 

requirement against a specific ledger type in daily reports and EOD reporting through 

ECS. The summary of the Shortfall Margin process will be removed, and relevant 

details moved to the Appendix. 

In the Specific Wrong-Way Risk section, the amendments will state that the Wrong 

Way Risk additional margin requirements are called on a t+1 basis to be met the 

following day, so that, for example, positions as of Monday EOD can incur additional 

margin called on Tuesday for receipt on Wednesday morning. As with other categories 

of additional IM, the amendments will delete unnecessary provisions relating to the 

posting of the requirement against a specific ledger type in daily reports and EOD 

reporting of the additional amount through ECS. A table summarizing the Wrong Way 

Risk process will be removed and relevant details moved to the Appendix. 

In the EMIR Add-on section, the amendments will clarify various aspects of this addon, which is collected for house and affiliate accounts for products for which Core IM 

is otherwise calculated using a 1-day MPOR. The add-on covers the amount, if any, by 

which Core IM will exceed that amount if it were instead calculated on a 2-day MPOR 

basis, in order to ensure that house and affiliate positions are margined using a 

minimum 2-day MPOR as required under EMIR. The amendments will further clarify 

that the EMIR Add-on is called at the same time as Core IM requirements, so that, for 

example, House and Affiliate account positions as of Monday EOD can incur EMIR 

add-on called on Monday night for receipt on Tuesday morning. A table summarizing 

the EMIR add-on process will be removed and relevant provisions moved to the 

Appendix.

In the Delivery Margins section, the amendments will revise the Procedures to state 

explicitly that the delivery margin is designed to cover potential price moves at a 99th

percentile level for the product in delivery. The amendments will further state that the 

Delivery Margin is typically set to the front month scanning margin rate for the product 

and held by the CCP until buyer security is paid by the buyer. The description of the 

calculation of Buyer Security will be clarified to be the notional value of bought 

positions that are deliverable within the following 2 business days. Similarly, the 

description of the calculation of Seller Security will be modified to be an additional 

requirement posted by the seller, calculated to cover any applicable costs and charges, 
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ICE Clear Europe Limited

Registered in England No.06219884

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

should they be unable to deliver the agreed product. The definition of Contingent 

Variation Margin will be clarified to be the difference between the Exchange Delivery 

Settlement Price and a representative market price for the remaining portion of the 

given underlying that is yet to be delivered (analogous to Variation Margin). Tables 

summarizing the Delivery Margin, Buyer/Seller Security and the Contingent Variation 

Margin will be removed with relevant details moved to the Appendix. 

In the Net Liquidating Value (“NLV”) section, certain non-substantive drafting 

improvements will be made. In addition, the description of the top up for NLV 

credit/debit will be revised to state that it is called for at the end of the day (call time t) 

and not the following day. A table summarizing the NLV will be removed with relevant 

details moved to the Appendix. 

In the Intraday and Overnight Buffer section, the amendment will add a statement of 

the use of mandatory buffer, which is called when trading out of intraday margining 

hours is observed that increases Core IM requirements above thresholds. For these 

positions traded outside the hours covered by the intraday margin process, the IM 

requirements are calculated using IRM. In cases where the resultant increase to an 

account’s IM exceeds the limit set, an overnight buffer equal to the largest exceedance 

is requested and held for the following 30 days. The amendments will add that this 

process will be introduced to achieve compliance with relevant requirements of EMIR2 

and will only be applicable to 1-day gross client omnibus margined accounts. The 

amendments will further clarify that voluntary buffer could be posted to reduce the 

Clearing Members’ operational burden of managing intraday margin calls. A table 

summarizing the intraday and overnight buffer process will be removed and relevant 

details moved to the Appendix. 

In the Ad-Hoc Buffer section, the amendments will clarify that Clearing Members may 

be requested to post additional buffers for any risks not covered by the requirements 

detailed in the Procedures. The amendments will specify that the requirements will be 

set by the Clearing Risk Department. A table summarizing the ad hoc buffer process 

will be removed and relevant details moved to the Appendix. 

In the discussion of intraday margining, the amendments will provide a clearer 

statement of the basis for such margining: that although the Clearing House 

collateralizes risk through IM and Variation Margin as part of the overnight process, 

the Clearing House may be exposed to uncollateralized exposures, or Intraday 

Shortfalls, due to adverse market price movements causing a change in the value of 

members positions, new trading activities resulting in an increased IM requirement on 

Clearing Members’ accounts and the value of securities held as collateral being 

reduced. The amendments will clarify that the Clearing Risk Department could 

calculate any additional IM that it may require on a near real-time basis intraday. 

In respect to Intraday Risk Monitoring the amendments will specify that the Clearing 

Risk Department monitors changes in Core IM in addition to Variation Margin on an 

ongoing basis. The Intraday Margin requirement of an account will be the sum of the 

Intraday IM and Intraday Variation Margin of the account. 

2 Article 26 of EMIR RTS Regulation (EU) No 153/2013 (ESMA/2016/429).
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ICE Clear Europe Limited

Registered in England No.06219884

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

The section on Core Intraday IM Calculation will be moved and updated. The revised 

section will state that the Core Intraday IM will be calculated and, when above 

thresholds, called on a near-real time basis intraday. For gross margined accounts, the 

amendments will reflect that because gross positions are only received at end of day, 

the Clearing House will not have near-real-time data for purposes of intraday 

margining. As a result, the Clearing House uses the previous end of day gross margin 

plus the change in net 2-day MPOR margin for the account between the start of day and 

the current point in time to determine intraday Gross IM. The amendments will detail 

the step by step process in the calculation and the formula that will be employed. The 

amendments will specify that for net margined accounts, the current real time net 

position is used to calculate intraday IM in the same way as End of Day IM for those 

accounts. 

In reference to Intraday Shortfall, the amendments will clarify that the calculation for 

the current collateral on account will include both collateral used to meet end of the day 

IM requirements and additional collateral available to cover intraday calls. The 

amendments will remove a statement that at a minimum, prices are refreshed hourly (as 

the Clearing House expects prices to be refreshed more frequently) but retain the 

general principle that the Clearing Risk Department monitors the prices utilized to value 

securities deposited as collateral throughout the day. The amendments will make 

various non-substantive drafting clarifications to the intraday limits. In addition, for 

Clearing Member Limit 2, the amendments will specify that the total value of collateral 

on deposit will be that of the loss making accounts and collateral in the House account. 

The amendments will add that for Clearing Limit 1 (in addition to Clearing Limit 2), 

the Clearing House will permit use of excess collateral present on the House account to 

offset Intraday Shortfalls arising on all other accounts in deficit. 

For Intraday Margin Call Triggers, the amendments will remove a duplicative statement 

of the minimum shortfall for an intraday call. 

The Intraday Margin Call Procedure will be revised to state that the 30-minute warning 

of a trigger breach is at the Clearing House’s discretion. The amendments will also 

remove, as a means of limiting intraday risk and satisfying a margin call, improving the 

profit and loss of the account (as that is likely impractical in the relevant timeframe). 

The amendments will also remove a concept that the Clearing Risk Department will

make recommendations to clearing members to avoid receiving intraday calls; rather, 

the goal will be to provide warnings prior to 19:30 London time so that all intraday calls 

are issued prior to 20:00 London time. The amendments will state that more than one 

intraday call may be made during the same day as required (without necessarily being 

based on market conditions). 

In the Overnight Window Monitoring section, the amendments will clarify the specific 

gross margined and ISOC accounts to which overnight monitoring applies. The 

amendments will also state that the Clearing Risk Department (rather than a senior 

Clearing Risk Department person), will issue a margin call or require the Clearing 

Member to take other risk reducing action, when appropriate. (ICE Clear Europe 

believes it is appropriate for the responsibility to be on the department rather than a 

senior individual.) An escalation process where a Member cannot be contacted or does 
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ICE Clear Europe Limited

Registered in England No.06219884

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

not reduce positions will be deleted along with notification of regulators, as this 

information is contained in separate Clearing House default management procedures. 

In the Intraday Buffer section, the amendments will clarify that if a Clearing Member 

wishes to reduce the operational burden of frequent intraday calls or Overnight Buffer, 

then the Clearing Member may choose to lodge excess collateral as Intraday Buffer. 

The amendments will also clarify that where a Clearing Member notifies ICE Clear 

Europe that it no longer wants to lodge Intraday Buffer, the buffer will be available to 

be returned after the next overnight margin run. The amendments remove unnecessary 

specifications of the means of providing such a notice. The amendments will also delete 

as unnecessary a statement that the Clearing Member will be able to choose to fund the 

requirement with the type of collateral of their choosing. 

In the Overnight Buffer section, the amendments will specify the particular gross 

margining and ISOC accounts to which it applies. The amendments will also correct 

that the amount will be called as part of the End of Day process (rather than intraday). 

In the Returning of Margin Call Collateral section, the amendments will provide that 

margin posted intraday in respect of an intraday margin call may, in extraordinary 

circumstances at the discretion of the Treasury Department, be returned in cases where 

the Clearing Member has unrealized gains (i.e., positive intraday variation margin). 

The amendments will replace the existing discussion of the F&O Guaranty Fund with 

a new section describing generally the sizing of the F&O Guaranty Fund, as established 

pursuant to the published Rules and Finance Procedures and the existing F&O Guaranty 

Fund model documentation. The amendments will describe the required size of the 

F&O Guaranty Fund, as being adequate to cover the first and second largest, nonmutually exclusive, uncollateralized losses from Member Groups resulting from agreed 

stress testing scenarios. The size must also be sufficient to enable the Clearing House 

to withstand a Clearing Member default to which the Clearing House has the largest 

stress testing exposure, or the second and third largest if the sum of those are greater. 

The size must be sufficient to cover the larger of the sum of the individually calculated 

segments for Energy and Financials & Softs (“F&S”) member portfolios or the largest 

contemporaneous scenario. If the Energy and F&S segment fund is smaller than the 

largest contemporaneous losses scenario, then an additional guaranty fund 

apportionment amount will be calculated and will be allocated to both Energy and F&S 

Fund segments in accordance with the Clearing Rules. In establishing the size of the 

F&O Guaranty Fund the ICE Initial Contribution is not included and must be met by 

Clearing Member contributions only. 

The amendments will add that review of the size of the F&O Guaranty Fund will occur 

at least every two months and will be based on historical stress testing results and other 

factors ICE considers relevant. The added section will describe the steps taken in the 

periodic review process, and the role of relevant ICE Clear Europe committees. Ad hoc 

assessments can be triggered by the Clearing House in addition to the periodic review. 

Extraordinary reviews may also be necessary based on stress testing results.

The amendments will state that Clearing Members normally have five UK business 

days (from the date of the notice) to lodge sufficient funds with the Clearing House if 

the overall level of the F&O Guaranty Fund or a specific Clearing Member’s allocation 
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ICE Clear Europe Limited

Registered in England No.06219884

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

must increase, consistent with the requirements of the Rules and Finance Procedures. 

Under extreme circumstances, the Clearing House can accelerate the call of the F&O 

Guaranty Fund requirements to a one day’s notice or otherwise reasonably change the 

notice period. A failure to meet these payments will be considered a breach of Clearing 

House Clearing Rules. Clearing Members will also have the ability to withdraw excess 

funds that result from a decrease in their fund contributions following a review of the 

level of the F&O Guaranty Fund. 

The amendments will add that ICE Clear Europe’s recommendations on the level of the 

F&O Guaranty Fund will be based on several factors including the level of the largest 

member’s uncollateralized losses historically and how it compares against the 

associated segment fund level or the total F&O Guaranty Fund, the level of the second 

and third largest members uncollateralized losses historically and how it compares 

against the associated segment fund level or the total F&O Guaranty Fund, the amount 

and number of stress loss charges called across memberships and any other relevant 

factors ICE Clear Europe deems appropriate. The size of the F&O Guaranty Fund will

also be subject to a floor in accordance with regulations, as described in further detail 

in the existing Futures and Options Guaranty Fund model documentation. 

The amendments will detail that a particular Clearing Member’s contribution to each 

of the Fund segments should reflect its relative share of clearing activity and relative 

share of uncollateralized loss. The amendments describe the two factor model used in 

allocating the F&O Guaranty Fund, based on IM and Uncollateralized Stress Loss, as 

provided in the existing Futures and Options Guaranty Fund model documentation. The 

amendments will also reference a summary of the F&O Guaranty Fund sizing and 

contribution processes in the Appendix. 

Various revisions will be made in the section on Model Performance to improve clarity. 

The amendments intend to clarify the top day margin coverage calculation performed 

by the Clearing House to assess whether the Core IM covers market price movements 

over the relevant MPOR at the 99th percentile level. The assessment is made at both 

the margin account level (the “macro” or “portfolio” level) and product level (the 

“micro” level). An outdated reference to the previous IRM v.1.0 model documentation 

will also be deleted. In the revised discussion of margin coverage, scope and 

definitions, references to certain EMIR requirements will be removed (as the relevant 

definitions incorporating regulatory requirements are part of the Procedures). At the 

macro level, the amendments will clarify that the margin coverage is calculated by 

comparing Clearing Member account’s Core IM requirement to the clean P&L. 

(Provisions addressing frequency of back-testing are removed in this section as the topic 

is addressed elsewhere in the Procedures.) Another reference to the CRD database and 

the results being stored in the database will be deleted as unnecessary detail for the 

Procedures. Non-substantive clarifications will be made to the calculation of margin 

coverage. 

In the section for Back Test Statistics the amendments will clarify that back testing 

involves consideration of a number of historical observations. The amendments will

delete language stating that statistics based on less than 200 days cannot be considered 

statistically significant and note that statistical back-testing is usually performed 

considering at least 250 business days. Although the Clearing Risk Department will
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ICE Clear Europe Limited

Registered in England No.06219884

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

retain the discretion to use other back-testing statistics in addition to the Basel Traffic 

Light System, the amendments will remove unnecessary references to specific 

examples of such statistics. A detailed escalation process based on the results of the 

statistics handled by the Risk Manager will also be deleted. As revised, the Clearing 

Risk Department will determine the appropriate action to address any breaches.

The amendments will specify that for macro level margin coverage, breaches will be 

monitored daily (but an unclear reference to such breaches being “controlled” daily will

be removed). A breach is reported, investigated and signed off by the Clearing Risk 

Department, not a specific risk manager as previously stated. The examples of 

appropriate action will be modified for concision to include reviewing the margin model 

and/or increasing the relevant production margin rates based on the Autopilot model. 

The amendments will specify that for the micro level, coverage of F&O margin rates is 

reported daily. Any breaches driving a breach at margin account level will be 

investigated and reviewed by the Clearing Risk Department, in efforts to provide 

information on the drivers of the breach and assess whether the breach was driven by 

erroneous prices. The amendments will clarify that mitigation actions required as a 

result of a breach will no longer be escalated to the risk manager but will be at the 

discretion of the Clearing Risk Department. Such mitigation actions can include 

reviewing and updating the relevant margin rates. 

The amendments will specify that back testing results that fall in the red or yellow zones 

under the Basel Traffic Light system will be reviewed and investigated by the Clearing 

Risk Department. Specifically for the micro level, the amendments will recognize that 

the large amount of margin parameters will make it difficult to review and action all 

back test statistical results. The amendments will make clarifying adjustments to the list 

of priorities when reviewing a statistical back test. The products driving red or yellow 

back test statistics will be identified and their back test performance will be reviewed. 

Micro back test statistics in the standard Basel redzone not driving macro back test 

breach results will be reviewed and the mitigation action will be considered at the 

discretion of the Clearing Risk Department. Micro back test statistics in the standard 

Basel yellow zone not driving macro back test breach results will be considered as part 

of the regular margin update proposals. 

The amendments will also make changes in the Monitoring and Reporting section. For 

margin coverage at the macro level, the amendments will state that the Clearing Risk 

Department will report the top day macro breaches daily (deleting the lengthier manual 

process previously included) and the breach statistics will be presented monthly at the 

Model Oversight Committee and bi-monthly at the F&O Product Risk Committee. 

References to manual reports being generated will be deleted from the macro back 

testing section. The process will also be more streamlined with the committee pack sent 

to the F&O Product Risk Committee, that is sent bi-monthly, including the macro backtest statistics. 

Similar amendments will be made to the margin coverage section for the micro level. 

The amendments will broadly state that the Clearing Risk Department will report the 

top day micro breaches daily (deleting the lengthier process previously included). The 

Clearing Risk Department will on a monthly basis generate reporting displaying the 
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ICE Clear Europe Limited

Registered in England No.06219884

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

statistics of a large selection of products across all parameter types. The detailed micro 

back testing results will be reported and reviewed monthly by the Clearing Risk 

Department. The Clearing Risk Department will produce a monthly summary of micro 

back testing results for material products and margin rates for the Model Oversight 

Committee. Micro back-testing results will be reviewed on a bimonthly basis at the 

F&O Product Risk Committee for material products. Certain definitions of materiality 

for these reviews in the existing Procedures will be removed, as ICE Clear Europe 

believes a more flexible approach to materiality is appropriate. The amendments will

state that any proposed model or parameter remediation actions due to product back 

testing results will be governed by the Model Risk Policy. A section and table 

summarizing the margin coverage and backtest statistics will be deleted as unnecessary. 

The amendments will make changes to the Sensitivity Testing section to add that the 

daily tests will undergo a monthly review at the material product or account level. They 

will also add that the model parameters are described in detail in the relevant ICE Risk 

Model documentation. 

A section on Stress Testing Methodology will be shortened, in light of the fact that 

stress testing is addressed in detail in other Clearing House policies and procedures. 

The amendments will add that the objective of stress testing is to ensure that the F&O 

Guaranty Fund is adequate to cover the uncollateralized losses arising from the two 

largest Clearing Member Groups. In addition, the results are used in Stress Margin, 

Shortfall Margin, and Guaranty Fund sizing and allocation. The amendments will state 

that the stress tests are performed under extreme but plausible market price moves. The 

amendments reference the two types of stress scenarios applied by the Clearing 

House—historical scenarios and theoretical scenarios. The Clearing House conducts 

daily stress testing on the Clearing Member portfolios, and results are reviewed by the 

Clearing Risk Department and escalated as necessary. 

The amendments will make revisions to the section on data quality checks and 

exclusions for dynamic data. A sentence on revisions to EDSPs will be moved to the 

new section on Revisions and Remediations discussed below. In the historical prices 

discussion, a sentence stating that use of external data will usually be based on a 

materiality assessment where a product’s IM reaches a significant portion of the overall 

Clearing House IM will be deleted. ICE Clear Europe does not believe it is necessary 

to specify this particular scenario given its general authority to use external data to run 

ad hoc analysis. 

The amendments will add a new section on Revisions and Remediations in relation to 

Data Management. The section will address what was previously referred to as 

exclusions and corrections and will outline other factors that could imply that 

remediation may be necessary. These will include corrections to market prices as a 

result of corporate actions. Certain other examples (including a footnote related to large 

moves from M&A announcements) will be removed as unnecessary given the more 

general authority to engage in remediation of data. Data that is remediated will have to 

be approved by the Clearing Risk Department and a senior Clearing Risk Department 

person. In addition, the remediations with related justifications will be reviewed 

monthly by the Model Monitoring Group. 
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ICE Clear Europe Limited

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The amendments will make changes to the document governance, breach management 

and exception handling provisions, to make them generally consistent with other ICE 

Clear Europe policies. The document owner identified by the Clearing House will be 

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

accordance with the Clearing House’s governance processes. The document owner will

also be responsible for reporting any material breaches or deviations to the Head of 

Department, Chief Risk Officer and Head of Regulation and Compliance in order to 

determine if further escalation is required. Exceptions to the Procedures will also be 

approved in accordance with the governance processes for approvals of changes to the 

Procedures. The amendments will state explicitly that changes to the Procedures will

also have to be approved in accordance with the Clearing House’s governance process 

and will take effect following completion of required internal and regulatory approvals. 

The amendments will also add the aforementioned Appendix summarizing the 

processes detailed in other parts of the Procedures.

A number of other drafting clarifications and conforming changes such as updating 

names of relevant persons, committees and departments, replacing and conforming 

defined terms, and deleting outdated references will also be made throughout the 

document. Various provisions will also be renumbered or relabeled throughout the 

Procedures. 

Compliance with the Act and CFTC Regulations

The amendments to the F&O Risk Procedures 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 make 

certain clarifications to the descriptions of the Clearing House’s margin 

methodology and Guaranty Fund sizing process (including the process for 

reviewing and adjusting the size of the F&O Guaranty Fund from time to time 

and the basis for allocating the F&O Guaranty Fund across clearing members). 

The amendments are not intended to result in changes in those practices or in 

margin or guaranty fund levels. 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 set forth above, the amendments to the Procedures make 

certain clarifications and enhancements to the descriptions of practices for 

collection of both Core IM and Additional IM (and the relevant components 

thereof). For instance, the amendment clarifies the procedures for determining 

and promoting production margin rates based on the autopilot rates resulting 

from standard application of the ICE Risk Model. The amendments also 

clarify the process for monitoring intraday changes in exposure and making 

intraday margin calls as a result of those calculations. The amendments to the 
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ICE Clear Europe Limited

Registered in England No.06219884

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

Procedures will thus facilitate the Clearing House’s ability to measure and 

monitor its credit exposure to each clearing member and to establish 

appropriate margin requirements to limit the Clearing House’s exposure to 

potential losses from clearing member defaults. The amendments thus 

enhance the Clearing House’s overall risk management and margin 

methodology specifically, consistent with the requirements of Core Principle 

D and Commission Rule 39.13.

• Governance. The revised Procedures will clearly state certain responsibilities 

of the Clearing Risk Department and Model Oversight Committee, among 

others, in relation to oversight of the Clearing House’s practices regarding 

margin for F&O products and the F&O Guaranty Fund. In line with the 

Clearing House’s other policies and procedures, the Procedures also describe 

the responsibilities of the document owner and appropriate escalation and 

notification requirements for responding to exceptions and deviations from the 

Procedures. In ICE Clear Europe’s view, the amendments will therefore 

enhance the Clearing House’s governance arrangements, consistent with the 

requirements of Core Principle O and Commission Rule 39.24.

As set forth herein, the amendments consist of the amendments to the F&O Risk 

Procedures. ICE Clear Europe has requested confidential treatment with respect to the 

amendments, which have 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@ice.com or +44 20 7429 4564. 

Very truly yours,

George Milton

Head of Regulation & Compliance