ICE Clear Netherlands employs advanced and prudent risk management practices, giving customers the confidence that risk is managed in a competent and timely manner. Positions are updated and margin requirements recalculated on a near real-time basis, reducing risk exposure. ICE Risk Model is ICE Clear Netherland’s sophisticated risk management system. The regulators have given their approval for using the system to calculate collateral requirements for credit and market risk. ICE Risk Model and the used parameters are independently validated each year. The system therefore meets all EMIR requirements. Market values, margin requirements, stress scenarios, and concentration risks of portfolios are calculated on an ongoing basis and values are stored in a central database.
The first line of defense includes a comprehensive set of membership requirements included within the ICE Clear Netherlands Rulebook. The following capital requirements are applicable to ICE Clear Netherlands clearing participants:
The second line of defense includes the margins requirements calculated over open positions at ICE Clear Netherlands. These are calculated by using ICE Risk Model.
The third line of defense is the clearing fund, which each clearing participant must contribute to and which can be used in case of a clearing participant default.
The policies and procedures used for the calculation of margin rates are approved by the ICE Clear Netherlands 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.
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.
ICE Clear Netherlands recalculates intraday margin requirements on a near real-time basis, using the most up to date positions and prices.
The clearing house can demand additional collateral at any time and whenever there is a significant intraday margin deficit.
As required under EMIR, article 7.6c of the clearing rulebook confirms that ICE Clear Netherlands will apply its own dedicated financial resources, also known as “skin in the game”, in the event of a member default, prior to the use of clearing fund contributions of non-defaulting clearing members.
In January of each calendar year, ICE Clear Netherlands must commit financial resources which represent 25% of the minimum required capital.
The minimum capital requirement for determining “skin in the game” is the minimum capital ICE Clear Netherlands has to maintain on its balance sheet pursuant to the regulatory technical standards for central counterparties (Commission Delegated Regulation (EU) No 152/2013) on Dec. 31 of each calendar year.
The initial calculation for ICE Clear Netherlands “skin in the game” is based on its balance sheet as at 31 December 2015 and the level of own capital amounts to EUR 1,875,000.00.
Dedicated Own Resources