ICE makes collateral changes

IntercontinentalExchange (NYSE: ICE), has announced that ICE Clear Europe will accept gold bullion as collateral for all energy and credit default swaps (CDS) transactions beginning 22 November.

Acceptable collateral for ICE Clear Europe currently includes cash and government securities. Gold bullion will be permitted for initial margin only and will be accepted by the clearing house by electronic transfer in increments of 1 troy ounce, and will be priced daily using the London Gold Fixing Price in US Dollars.

In addition, ICE Clear Europe recently introduced a triparty collateral management arrangement with Euroclear Bank, the international central securities depository, through which European government bonds may be used as collateral to fulfill initial margin requirements. Both the addition of gold bullion collateral and the availability of collateral via Euroclear Bank are intended to enhance the stability and flexibility of the clearing house, particularly during periods of intensive economic stress, while providing alternatives to customers.

“We are pleased to offer these enhancements as the first clearing house in Europe to permit gold bullion as collateral,” said Paul Swann, President of ICE Clear Europe. “By working closely with members, we are continually searching for ways to lead in enhancing risk management practices. Particularly in times of economic change or uncertainty, the addition of gold and Euroclear Bank’s triparty collateral management services bring additional flexibility and security to the markets we serve globally.”

Yves Poullet, Chief Executive Officer of Euroclear Bank, said: ”As the market continues to move from unsecured to secured transactions, accessing and efficiently managing collateral is becoming increasingly important. Helping clients optimize use of their collateral held with Euroclear Bank is precisely our objective, which is easily achieved when collateralizing margin calls from ICE Clear Europe. We are delighted to be of service.”

ICE Clear Europe launched in November 2008 to serve the futures markets of ICE Futures Europe and ICE’s OTC energy markets and today lists more than 330 energy contracts for clearing. In July 2009, ICE Clear Europe introduced clearing for European CDS and has cleared more than €3.7 trillion in gross notional value to date across 130 credit derivative products.

ICE Clear Europe offer the industry’s only real-time risk management methodology, with marks based on price feeds from ICE’s energy markets. The methodology provides calculations of initial margin, realized and unrealized variation margin, and fully revalues all positions throughout the trading day. This provides the clearing house and all clearing members with trade, position, profit and loss and margin reports at five minute intervals, thereby substantially reducing intraday price risk.