1

July 2011

ICE CDS Margin Calculator ICE Link GUI

2

ICE CDS Margin Simulation CalculatorSummary

• Buy-side firms can access the Margin Simulation Calculator to simulate margin requirements via the ICE Link GUI

• Buy-side firms can simply point and click on positions in the positions blotter to calculate margin as ICE Link already syncs all Buy-side positions with the Trade Information Warehouse

• Buy-side firms may also upload sample portfolios, via direct GUI entry or spreadsheet upload, to run “what-if” scenarios

• Margin simulation calculations can be run on portfolios consisting of CDS Single Names and Indices (e.g. CDX/iTraxx indices and 125 single name components of CDX.IG and iTraxx.Europe)

• The Margin Simulation Calculator provides users with detailed analysis of the margin results providing deeper transparency of the ICE margin methodology

Select the links below to view these recordings:

ICE Risk Margin Management Methodology Webinar

How to Guide for the Margin Simulation Calculator (7 minutes)

3

Based on expected losses given a default

Concentration Requirement

Liquidity/Basis Risk Requirement

Jump-To-Default Requirement

Risk associated with moves in interest rates

Summary Of Risks Captured by Model Components

Spread Response Requirement

Risk associated with spread moves, curve shape changes and recovery rates

Costs associated with large position liquidation

Total risk requirementInitial Margin Requirement

Interest Rate Risk Requirement

Costs associated with Bid/Offer exposure upon portfolio liquidation

Initial Margin RequirementDynamic Stress-Based Regime

4

ICE Margin Simulation CalculatorIndex Decomposition Example

• Within a portfolio, indices and their single name constituents offset each other for margin purposes (i.e. BUY-CDX.IG.14-5Y 125MM vs. SELL-MARRIOT T 5Y 1MM)

• To process offsets, the ICE margin model decomposes the underlying single name components of an index based on the single name weighting and notional of the index position (i.e. MARRIOTT 0.80% Index Weighting in CDX.IG.14 for 125MM Notional offset is 1MM)

• An offset algorithm is applied to select the highest correlated index with the common single name entity constituent based on: Maturity, Series, Smallest Weighting, and Closest Coupon (i.e. CDX.IG.14 and CDX.IG.HVOL.14 both have MARRIOTT, but the CDX.IG.14 has the smaller weighting)

• The portion of the Index or Single Name not applied to an offsetting position is calculated with the reduced notional (i.e. BUY-CDX.IG.14 125MM offsets a SELL-MARRIOTT 1MM position and margin is calculated on the remaining BUY-CDX.IG.14 124MM)

5

1. Filter positions eligible for margin simulation

2. Select All (or) Specific Positions

3. Click the Margin button and select a potential FCM and check the margin ‘Simulation’ box

Note:

A. In ICE Link production, all client DTCC warehouse positions will already be displayed in the Positions Blotter

B. Additional positions may be manually entered or uploaded via spreadsheet (see slide #7 & #8)

C. Clients may use a demo or production environment

Margin Simulation GUI1. Select Positions in a few clicks

6

1. View all portfolios with summary margin information per portfolio (5 key risk components: Spread, JTD, Liquidity/Basis, Interest Rate, Concentration)

2. Select portfolio in margin summary to view margin model details that make up the margin and MTM totals

3. Users may export or email results

Margin Simulation GUI2. View Simulated Margin Results

1

2

3

7

1

2

3

4

1. Trade positions may be uploaded to the Positions Blotter via spreadsheet (CSV file) for margin testing

2. After selecting the ‘Spreadsheet Upload’ option in the menu, users select the file name of the spreadsheet to upload

3. Users select Spreadsheet upload to insert the positions into the blotter

4. For the spreadsheet upload format, select the positions upload document in the Help Documents screen

Note: To delete or update demo positions, right click on a selected position in the Position Blotter and select ‘Delete; or ‘Update’ position

Margin Simulation GUI3. Uploading Portfolios: Spreadsheet

8

1. To manually upload a portfolio (position/ trade level) for margin testing, select the New Deal-Single Name or Index option in the GUI menu

2. In the trade entry screen, select a counterparty (an Executing Broker) and a clearing eligible credit, and select OK when finished.

3. To calculate margin on a single entity/index, simply select the ‘View Projected Margin’ button in the manual trade upload screen without the need to upload the trade

Note: A list of clearing eligible credits and simulation only credits are available in the Clearing, Clearing Reports tab in the Clearing Eligible Instruments file

1

2

Margin Simulation Calculator GUI4. Uploading Portfolios: Manual Entry

3

9

North America Europe

ICE Contacts

ICE Link Client Servicesicelinkna@theice.com+1 212 323 6030

Joseph Miller, ICE Link SalesJoseph.Miller@theice.com+1 212 323 6023

Niels Pennings, ICE Link SalesNiels.Pennings@theice.com +1 212 323 6024

Corry Bazley, ICE Clear Credit Corry.Bazley@theice.com +1 212 323 6022

ICE Link Client Servicesicelinkeurope@theice.com+ 44 (0)20 7429 4500

Ben Foufa, ICE Link SalesBen.Foufa@theice.com+ 44 (0)20 7429 4611

Rajeev Kumar, ICE Link SalesRajeev.Kumar@theice.com + 44 (0)20 7429 4612

Suzanne Hubble, ICE Clear Europe Suzanne.hubble@theice.com+44 (0) 20 7065 7625