ICE Trust's First Clearing Process Already Underway

IntercontinentalExchange(R) began operation of ICE Trust(TM), a central counterparty clearing house for credit default swaps (CDS), on 9 March. Founding clearing member participants of ICE Trust have begun the transfer of bilateral CDS trades to the clearing house for processing

By None

IntercontinentalExchange(R) began operation of ICE Trust(TM), a central counterparty clearing house for credit default swaps (CDS), on 9 March.

Founding clearing member participants of ICE Trust have begun the transfer of bilateral CDS trades to the clearing house for processing and clearing as of 9 March.

The process resulting in novation to ICE Trust is underway for outstanding bilateral trading positions that settle on North American Markit CDX indices currently listed for clearing by ICE Trust. Completion of the first clearing process is expected to occur on 16 March.

The ICE Trust guaranty fund will continue to scale in conjunction with the transfer of CDS positions into the clearing house. In addition to clearing member contributions, ICE also contributed an initial $10 million toward the establishment of the guaranty fund. Over a two year period, ICE will increase its guaranty fund commitment to $100 million.

ICE utilized select infrastructure, domain knowledge and personnel from each entity to establish ICE Trust. In addition to utilizing in-house resources, ICE Trust has also entered into an agreement with Markit to produce daily settlement prices required for mark-to-market pricing, margining and clearing.

CDS clearing by ICE Trust follows several successful initiatives already underway within the industry to reduce systemic and operational risks including involvement in portfolio compression efforts and credit event auctions, which it administers in conjunction with Markit.

Compression runs have reduced over $2 trillion in notional outstanding for single-name CDS in recent months, and credit event auctions have been relied upon by market participants for the orderly settlement of credit derivative trades referencing 43 defaulted entities, including Fannie Mae and Lehman.

L.D.

«