03 june 2013 - the ice · › on 20 december 2012, ice clear europe and liffe administration ... of...
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Legal Disclaimer
Disclaimer and Cautionary Note Regarding Forward-Looking Statements
This presentation may contain “forward-looking statements” made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Statements regarding our businesses that are not
historical facts are forward-looking statements that involve risks, uncertainties and assumptions that are
difficult to predict. These statements are not guarantees of future performance and actual outcomes and
results may differ materially from what is expressed or implied in any forward-looking statement. In some
cases, you can identify forward-looking statements by words such as "may," "hope," "will," "should,"
"expect," "plan," "anticipate," "intend," "believe," "estimate," "predict," "potential," "continue," "could," "future"
or the negative of those terms or other words of similar meaning.
In addition, you should carefully consider the risks and uncertainties and other factors that may affect future
results in ICE's and NYSE Euronext's respective filings with the SEC that are available on the SEC's web
site located at www.sec.gov, including the sections entitled "Risk Factors" in ICE's Form 10−K for the fiscal
year ended December 31, 2012, as filed with the SEC on February 6, 2013, and "Risk Factors" in NYSE
Euronext's Form 10−K for the fiscal year ended December 31, 2011, as filed with the SEC on February 29,
2012. SEC filings are also available in the Investors & Media section of ICE’s website and the Investor
Relations section of NYSE Euronext’s website. You should not place undue reliance on forward-looking
statements, which speak only as of the date of this presentation. Except for any obligations to disclose
material information under the Federal securities laws, ICE and NYSE Euronext undertake no obligation to
publicly update any forward-looking statements to reflect events or circumstances after the date of this
presentation.
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Agenda
Background to ICE Clear Europe
Regulatory Reform Agenda: Future Impacts and Implications Swaps to Futures Transition
EMIR Requirements
Customer Account Structures
Trade Confirmation and Registration
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ICE Commodity and Derivatives Markets
Integrated Markets, Clearing and Technology
ICE Regulated Futures Exchanges ICE OTC ICE Data & Services
EUROPE
ENERGY & EMISSIONS
Brent Crude
Brent NX Crude
WTI Crude
Gasoil
Low Sulphur Gasoil
ASCI Crude
Oil and refined products
Natural gas liquids
Liquefied natural gas
European natural gas
U.K. Electricity
Coal
Emissions
Iron Ore
Freight
OTC CONTRACTS
AGS & ENERGY
Cocoa
Coffee
Cotton
Sugar
Orange Juice
Barley
Canola
Wheat
Corn
Soybeans
Financial Gas
Financial Power
FINANCIAL
Currency Pairs
U.S. Dollar Index
Russell Indexes
Real-time prices/screens
Indices and end of day reports
Tick-data, time and sales
Market price validations
Forward Curves
WebICE & ICE Mobile ICE eConfirm ICE Link
ICE Chat
ICE Match
Chatham Energy
Coffee Grading
Trade Vault
OTC Credit – Creditex
CDS – indexes, single names, structured products
BRIX – Brazilian Power Markets
ICE Clear U.S., ICE Clear Canada ICE Clear Europe The Clearing Corp, ICE Clear Credit
Global Clearing Houses
U.S. & CANADA MARKET DATA
SERVICES
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Overview of ICE Clear Europe › ICE Clear Europe (ICE Clear) regulatory status is as follows:
• Recognised Clearing House supervised by the U.K.’s Financial Services Authority (FSA);
• Designated under the Settlement Finality Directive by the U.K. FSA;
• Systemically important payment system overseen by the Bank of England;
• Derivatives Clearing Organisation supervised by the U.S. Commodity Futures Trading Commission; and
• Securities Clearing Agency supervised by the U.S. Securities and Exchange Commission.
› ICE Clear currently offers clearing and settlement services to: ‒ ICE Futures Europe’s contracts (including the ICE ECX Emissions products)
‒ ICE Futures US Energy Division contracts
‒ iTraxx Europe indices and Single Name OTC CDS contracts
› ICE Clear commenced operations on 03 November 2008 and, in relation to its energy clearing business: ‒ has 57 Energy Clearing Members
‒ clears contracts with a notional value of approximately $40bn per day
‒ can call on a Guaranty Fund of approximately $1.8bn (made up from $650mn cash and collateral deposited in the Fund by ICE and its Members, and powers of assessment)
› CDS clearing was launched on 27 July 2009, and: ‒ currently has 16 CDS Clearing Members and has cleared:
• €10.66trn in notional value across 288,443 CDS Index transactions with an open interest of €193bn (currently 46 indices);
• €1.73trn in notional value across 336,821 CDS Single Name transactions with an open interest of €337bn (currently 121 names);
‒ can call on a Guaranty Fund of over €5bn (made up from cash deposited to the Fund by ICE and its Members, and powers of assessment).
› On 20 December 2012, ICE Clear Europe and LIFFE Administration and Management (“LIFFE A&M”) entered into a clearing services agreement (“CSA”) pursuant to which ICE Clear Europe will provide clearing services to the London market of NYSE Liffe from 01 July 2013.
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Overview of the regulatory reform agenda
› G20 Commitments
All standard OTC derivative contracts should be traded on exchanges or electronic trading platforms, where
appropriate, and cleared through central counterparties by end-2012 at the latest; and
OTC derivative contracts should be reported to trade repositories and that non-centrally cleared contracts should
be subject to higher capital requirements.
› U.S. Regulation – the “Dodd-Frank Wall Street Reform and Consumer Protection Act”
› European initiatives:
European Regulation on OTC derivatives, CCPs and trade repositories (EMIR):
‒ ‘clearing eligibility’ – compulsory clearing of certain OTC derivatives
‒ new standards for clearing houses
‒ establishment of trade repositories
MiFID Review
› Review of Basel Capital Accord
› CPSS/IOSCO Principles for Financial Market Infrastructure
› Proposals on CCP Resolution
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ICE Initiatives Supporting Regulatory Reform Agenda
Proposed Reform ICE Energy and OTC CDS / FX Initiatives
Mandatory Execution on a
SEF
• Developing SEF platform for bilateral trading of uncleared OTC Energy Swaps
• Actively engaged with FIA /ISDA working group on certainty of execution – planned launch
of “Plus One” for all ICE cleared products
Mandatory Clearing
• Worked with regulators to provide data regarding pre-enactment swaps
• Transition of 650+ Energy Swaps to Futures contracts
• Clearing over 330 CDS products globally (indices and single names)
• “Dual-clearing” of iTraxx Index products at ICE Clear Credit
• CDS index futures product being developed for launch in 1H131
• Expansion of product offering to include additional single names and indices
• Launch of OTC CDS Client Clearing for Europe in Q3 20131
Margin & Segregation
Requirements
• Implemented Gross Margin for futures clients of US FCMs
• Petitioned CFTC and SEC to comingle CDS indices and single names in the CFTC
regulated Cleared OTC Derivatives Account class (4d(f)) providing ICE the ability to offer
portfolio margining for its client clearing offering
• Implementation of LSOC for November 8, 2012 compliance date
• Assessing EMIR requirements for customer protections
Reporting Requirements • Clearing Houses will support confirmation reporting for non-SEF and SEF cleared trades
• ICE Link will support all reporting requirements on behalf of market participants
Swap Data Repositories
and Trade Repositories • Launch of ICE Trade Vault for CDS, energy and other commodity contracts
1 Subject to regulatory approval
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Swaps to Futures Transition
› ICE conducted an extensive review and analysis of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act) in the U.S. and parallel laws presently being drafted in Europe and Asia. In
order to determine how these rules will affect swaps participants across the U.S., Europe, and Asia and have
also received substantial input from many ICE Participants. Based on this analysis, ICE concluded that, once
implemented, these laws and regulations are likely to increase the cost and complexity for swaps market
participants relative to futures markets participants.
› ICE’s announced its intention to convert each existing OTC cleared Energy swap and option product and open
interest to an economically equivalent future or option contract listed on either the ICE Futures US or ICE
Futures Europe exchange.
› The transition occurred over the weekend of 13/14 October 2012 in line with the implementation of the Swap
Dealer/Swap Market Participant rules.
ICE Futures Europe ICE Futures US Energy Division
Crude Oil U.S. Natural Gas
Refined Products Electric Power
Natural Gas Liquids U.S. Environmental Products
Freight
Iron Ore
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Impact of EMIR on CCPs and operating processes
› ICE has contributed extensively to the consultation process in relation to global regulatory reform, including
the Dodd-Frank Act, EMIR and CPSS-IOSCO Principles. Core concerns expressed include level of
prescription and possibility of regulatory arbitrage.
› Key areas of change:
1. CCP rules and operating procedures:
Re-authorisation process
Operating structures and Governance
Risk Management standards
Acceptable collateral and liquidity risk management
Customer protection models
2. Trade reporting to Trade Repositories.
3. Implementation Timetable.
4. Impact on capital charges.
5. Impact of areas of regulatory variance.
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Q3 2013
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014
EMIR – Current Implementation Timeline
15 Mar 13 – 15 Sep 13: EU/EEA CCPs have 6 months to submit their application for authorisation under EMIR.
15 Mar 13 – 15 Apr 13: NCAs initial notifications of OTC derivatives already cleared by CCPs in their jurisdiction.
CCP registration
Trade reporting
15 Apr 13 – 15 Mar 14: National competent authorities (NCAs) have 6 months to decide whether to authorise after determining application is complete.
Mandatory clearing
15 Mar 13: First date TR can send application for authorisation to ESMA.
25 Jun 13: First possible registration of TR (ESMA have 20 working days to determine completeness, then 40 working days to make a decision once complete. Registration comes into effect 5 working day after decision).
23 Sep 13: First possible reporting start date for IR and credit (90 calendar days after first TR registered).
1 Jan 14: First possible reporting start date for commodities and other asset classes (assuming TR is registered for the specific asset class before 1 Oct).
15 Mar 14: Last possible registration date for existing CCPs.
16 Apr 13 – 16 Mar 14: NCAs notify of additional OTC derivatives cleared in their jurisdiction as they authorise CCPs.
16 Oct 13 – 16 Sep 14: ESMA will have 6 months to submit draft RTS on the class of OTC derivatives subject to clearing obligation and effective dates.
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› EMIR requires CCPs to keep separate records and accounts so its Clearing Members can distinguish assets
and positions:
held for the clearing member from those of its clients - "Omnibus Client Segregation"; and
held for one client from those held for other clients – “Individual Client Segregation.”
› Clearing Members are then also required to offer these client protection options to their clients. In relation to
Individual Client Segregation, where a client elects for this level of protection, their positions and margin will
be held in an account at the CCP together with any excess margin.
› ICE is proposing to introduce the following segregation models under EMIR:
Segregated Client Account: Omnibus Client Segregation (Net Margin for ETD);
Non-Segregated Client Account (TTCA): Omnibus Client Segregation (Net Margin for ETD);
Individual Segregation through Sponsored Principal Model.
Alternative (Margin-flow co-mingled) Individual Segregated Account.
› Additionally, ICE Clear Europe is currently discussing with various custody agents and securities
depositories the possibility of enhancing protection of customer assets through tri-party, quad-party or
similar arrangements.
EMIR Customer Account Structure models
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ICE eConfirm
› Internet-based Electronic Trade Confirmation Services:
Central Web-Based Platform to Submit & Confirm Trades & Resolve Discrepancies
Two-Way Matching between 2 Counterparties OR a Broker & Customer
Three-Way Matching between a Broker & 2 Counterparties
For ALL Standard Trades NOT for “Just ICE Trades”
Confirm Trades Executed via a Voice Broker, Direct, or Online
› Processes trade data from 250+ counterparties & brokers. Utilized Globally by the Largest Banks, Energy
Marketers, Utilities, & Hedge Funds
› Fourteen million trades matched & warehoused since 2002 go live
› Accepts broad range of bilateral swaps, options & physical trades
› Leading Technology and Systems
State of the Art Technology with Physical & Logical Security
Regular External Audit of all Processes and Controls (including Comprehensive SAS 70 Type II Audit
performed Annually by PWC)
Comprehensive Data Retention Policy
› https://www.theice.com/econfirm.jhtml
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ICE Trade Vault
› ICE Trade Vault, LLC (“ICE Trade Vault”) was the first SDR approved by the CFTC. ICE Trade Vault
is registered in the credit, commodities and FX asset classes. During October 2012, ICE Trade Vault
went live with CDS. Commodities went live on 28 February 2013 for Swap Dealers.
› ICE has established an EU entity domiciled in London, ICE Trade Vault Europe Limited, in order to
best serve our European participants. ICE Trade Vault EU is the legal entity which is seeking TR
registration under EMIR. By operating the TR service via this entity, ICE Trade Vault EU is addressing
concerns expressed by our European participants regarding the extraterritorial reach of Dodd-Frank.
› Reporting Guidance & Trade Flows. ICE Trade Vault has contributed to consultation on Technical
Specs are principal based in regards to trade reporting and trade flows.
› ICE is committed to making the technical integration process streamlined for its customers. Trade
data submission is possible via three easy methods:
XML API enables real time submissions and queries
Tab delimited file upload facilitates batch processing
Trade entry on-screen via simple website features
› https://www.theice.com/trade_vault.jhtml
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Contacts
Mark Woodward
Director, Corporate Development
ICE Clear Europe
+44 (0)20 7065 7617
mark.woodward@theice.com
ICE Clear Europe
icecleareurope@theice.com
www.theice.com
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