SPAN Margin Parameter Files Layout Guide

Version 2.5

September 2011

SPAN Margin Parameter Layout Guide

ICE Clear Europe Limited

Contents
1 2 3 4 5 6 7 8 9 Introduction .................................................................................................. 3 Scanning Ranges and Tier Structure ......................................................... 4 Inter-Month Spread Rates ........................................................................... 6 Strategy Spread Rates ................................................................................ 7 Inter-Commodity Spread Rates 2-Leg Overview ....................................... 9 Inter-Commodity Spread Rates 3-Leg Overview ..................................... 10 Inter-Commodity Spread Rates Detailed ................................................. 11 Position Allocation .................................................................................... 13 Acceptable Collateral List ......................................................................... 14

10 Deliverable Contracts Security Rates....................................................... 15

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SPAN Margin Parameter Layout Guide

ICE Clear Europe Limited

1 Introduction
ICE Clear Europe publishes SPAN margin parameter information in Comma Separated Value (CSV) format. The following document is a guide to information displayed in this format. SPAN margin parameters for all cleared ICE products, both exchange traded and OTC, is contained in the following four files: a. b. c. d. e. Scanning ranges and tiering Inter-month spread rates Strategy spread rates Inter-commodity spread rates Position allocation details

Also available on the same page is: f. Acceptable collateral list g. Deliverable contracts security rates In the following guide ICE Brent Futures (BRN) will be used as an example to illustrate how information is organised. For further information please e-mail questions to: icecleareuroperisk@theice.com.

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SPAN Margin Parameter Layout Guide

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2 Scanning Ranges and Tier Structure

This file contains the margin requirements applicable to outright positions; information on the tiers that different expiries along the forward curve are grouped into and the discounts applied to the scanning ranges. Listed below are the column headings contained in this file together with a description on the information contained in each column:
Column A B C D E F G Column heading Effective Date Logical Commodity code Contract Name Currency New Scanning Range Previous Range Scanning Description Date the rate takes effect; changes will be reflected in margin calls made on the following business day. TRS contract code: Brent is BRN. Name of contract: IPE Brent Futures. Currency of contract; Brent is denominated in USD. New scanning range that will take effect on the date shown in A. For Brent this will expressed as $s per lot. Previous scanning range that was superseded. This is the new rate for each tier having taken into account the discount rate shown in column K. For example 12,000 x 92% = $11,040. This is the previous rate for each tier. The percentage change between columns G and H. Tier number. The Brent forward curve is grouped into 9 tiers. The new discount rate for each tier that is applied to the new scanning range shown in column E. The previous discount rate that was applied to the previous scanning range shown in F. The forward expiry that a tier starts from, with 1 being the front month. Brents tier 1 contains the front month only (the first forward expiry). The forward expiry a tier ends with. As noted this is also 1 meaning that the front month only forms tier 1. The expiry month (or day for daily contracts) of the first contract within a particular tier. Please note that this expiry date will not always be accurate as it will not be updated on each occasion an expiry occurs. The expiry month (or day for daily contracts) of the last contract within a particular tier. Please note that this expiry date will not always be accurate as it will not be updated on each occasion an expiry occurs or when new expiries are added to the forward series.

New Applied Margin Rate

H I J K L M

Previous Applied Margin Rate Percentage Change Tier New Discount rate Old Discount Rate Tier structure from

N O

Tier structure to Indicative expiry from

Indicative expiry to

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SPAN Margin Parameter Layout Guide Column Q Column heading New Volatility Percentage Range Description

ICE Clear Europe Limited

The new volatility shift that is applied to option positions when calculating scanning losses, expressed as a percentage of a percentage. This only applies to contracts with options on them. Previous option volatility shift. The new minimum margin requirement applicable to deeply out-of-the-money options. The short option charge for Brent is $1 per lot. This is the spot month top-up rate applied to the front month; if blank or zero no top-up is applied. This indicates if the scanning range is expressed as a per lot, per day or per Mwh rate. The Brent scanning range is expressed in $s per lot. Lot size. Brent is 1,000 barrels per lot. Indicates if the contract is Exchange traded or OTC traded. Brent is an exchange traded contract. This indicates which product group the contract belongs to, this can be Oil, Gas, Power, Emissions or Coal as appropriate. Indicates whether Position Allocation method is applied to this contract. If Yes, the details of the allocation can be found in the published Position Allocation file. This indicates whether margin erosion is applied to the front month and if so, which method is used. Linear method Erosion factor = number of remaining days in the settlement month / total number of days in the settlement month Square root of time method Erosion factor = SQRT (number of remaining days in the settlement month / total number of days in the settlement month) Erosion factors are updated daily using the number of calendar days in the month convention and applied to original positions in that contract.

R S

Old Volatility Percentage New Short Minimum

Range Option

T U

Margin Top Up Rate Per Lot, Day or Mwh

V W X

Multiplier Market Product Group

Position Allocation

Margin Erosion

Please note that the New Applied Margin Rates are indicative rates. The final result produced by SPAN may differ slightly due to rounding rules; this is not included in this file.

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SPAN Margin Parameter Layout Guide

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3 Inter-Month Spread Rates

This file contains the margin requirements applicable to inter-month spread positions within the same contact.
Column A B Column heading Effective Date Product Group Description Date the rate takes effect; changes will be reflected in margin calls made on the following business date. This indicates which product group the contract belongs to, this can be Oil, Gas, Power, Emissions or Coal as appropriate. TRS contract code: Brent is BRN. Name of contract: IPE Brent Futures. The inter-month tier the rate applies to; 1-2 means the rate applies to spreads where one leg fall into tier 1 and the second leg falls into tier 2. Currency of contract. New inter-month spread rate. For Brent this is quoted in $s per spread. Old inter-month spread rate. Percentage change between the old and new intermonth rates. The priority order the spreads are calculated in. The priorities are set to ensure spread positions are margined as efficiently as possible with the lowest rate always assigned the highest priority. Expiries (or day for daily contracts) of the contract within a particular spread tier versus expiries from the conversed spread tier. The inter-month spread charge previously applied once the previous scanning range discount rates have been taken into account. This is the rate that is actually applied once the scanning range discount rates have been taken into account.

C D E

Logical Commodity code Contract Name Tier

F G H I J

Currency New Spread Parameter Old Spread Parameter Percentage Change Priority

Periods

Old Applied Margin Charge

New Applied Charge

Margin

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SPAN Margin Parameter Layout Guide

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4 Strategy Spread Rates

This file contains the margin requirements applicable to strategy spread positions within the same contact.
Column A B Column heading Effective Date Product Group Description Date the rate takes effect; changes will be reflected in margin calls made on the following business date. This indicates which product group the contract belongs to, this can be Oil, Gas, Power, Emissions or Coal as appropriate. TRS contract code: Brent is BRN. Name of contract: IPE Brent Futures. Currency of contract. The two strategy spreads available are: B: Butterfly (3 leg spread defined as 1 lot long (short), 2 lots short (long), 1 lot long (short)), C: Condor (4 leg spread defined as 1 lot long (short), 1 lot short (long), 1 lot short (long) and 1 lot long (short)). The five different period types available are: M: Monthly (positions must be in consecutive relative expiries; 4, 5 and 6 for example), Q: Quarterly (positions must be 3 consecutive expiries apart; 1, 4 and 7), S: Six-monthly (positions must be 6 consecutive expiries apart; 1, 7 and 13), N: Nine-monthly (positions must be 9 consecutive expiries apart; 1, 10 and 19), Y: Yearly (positions must be 12 consecutive expiries apart; 1, 13 and 25). Relative expiry month, e.g.1 (front month) of the first leg of the spread Relative expiry month of the second leg of the spread Relative expiry month of the third leg of the spread Relative expiry month of the fourth leg of the spread (applies only to condor spreads) The expiry month of the first leg of the particular spread. Please note that this expiry date will not always be accurate as it will not be updated on each occasion an expiry occurs. The expiry month of the second leg of the particular spread. Please note that this expiry date will not always be accurate as it will not be updated on each occasion an expiry occurs.

C D E F

Logical Commodity code Contract Name Currency Strategy Type

Strategy Period Type

H I J K L

Period 1 Period 2 Period 3 Period 4 Indicative expiry 1

Indicative expiry 2

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SPAN Margin Parameter Layout Guide N Indicative expiry 3

ICE Clear Europe Limited The expiry month of the third leg of the particular spread. Please note that this expiry date will not always be accurate as it will not be updated on each occasion an expiry occurs. The expiry month of the fourth leg of the particular spread (applies only to condor spreads). Please note that this expiry date will not always be accurate as it will not be updated on each occasion an expiry occurs. New strategy spread rate. For Brent this is quoted in $s per spread. Old strategy spread rate. Percentage change between the old and new strategy spread rates. This is the rate that is actually applied once the scanning range discount rates have been taken into account. The inter-month spread charge previously applied once the previous scanning range discount rates have been taken into account.

Indicative expiry 4

P Q R S

New Spread Parameter Old Spread Parameter Percentage Change New Applied Margin Charge Old Applied Margin Charge

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SPAN Margin Parameter Layout Guide

ICE Clear Europe Limited

5 Inter-Commodity Spread Rates 2-Leg Overview

The main aim of this file is to give the user a quick overview of all 2-leg inter-commodity offsets. The percentage ranges shown are the amount the scanning ranges for each leg of the spread are reduced by where the position is part of an inter-commodity spread.
Column A B Column heading Effective Date Product Group A Product Name A Logical commodity side A Product Group; Logical Commodity Description Date the rate takes effect; changes will be reflected in margin calls made on the following business date. This indicates which product group the contract on side A of the spread belongs to, this can be Oil, Gas, Power, Emissions or Coal. The name of the contract that forms side A of the inter-commodity spread. The TRS contract code that forms side A of the inter-commodity spread. This indicates the product group that the product belongs to and the product's TRS contract code. The percentage ranges show the variety of inter-commodity credits for indicated offset pairs. The range in brackets shows the previously applied inter-commodity spread credit.

C D

E-

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SPAN Margin Parameter Layout Guide

ICE Clear Europe Limited

6 Inter-Commodity Spread Rates 3-Leg Overview

The main aim of this file is to give the user a quick overview of all 3-leg inter-commodity offsets. The percentage ranges shown are the amount the scanning ranges for each leg of the spread are reduced by where the position is part of an inter-commodity spread.
Column A B Column heading Effective Date Group A Description Date the rate takes effect; changes will be reflected in margin calls made on the following business date. This indicates which product group the contract on side A of the spread belongs to, this can be Oil, Gas, Power, Emissions or Coal. The TRS contract code that forms side A of the intercommodity spread. The name of the contract that forms side A of the intercommodity spread. This indicates which product group the contract on side B of the spread belongs to, this can be Oil, Gas, Power, Emissions or Coal. The TRS contract code that forms side B of the intercommodity spread. The name of the contract that forms side B of the intercommodity spread. This indicates which product group the contract on side C of the spread belongs to, this can be Oil, Gas, Power, Emissions or Coal. The TRS contract code that forms side C of the intercommodity spread. The name of the contract that forms side C of the intercommodity spread. The percentage ranges show the variety of inter-commodity credits for indicated offset pairs. The range in brackets shows the previously applied intercommodity spread credit.

C D E

Logical commodity side A Name A Group B

F G H

Logical commodity side B Name B Group C

I J K L

Logical commodity side C Name C New Rate Old Rate

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SPAN Margin Parameter Layout Guide

ICE Clear Europe Limited

7 Inter-Commodity Spread Rates Detailed

This file contains the margin requirements applicable to inter-commodity spread positions. The percentages shown are the amount the scanning ranges for each leg of the spread are reduced by where the position is part of an inter-commodity spread.
Column A B C Column heading Effective Date Product Group A Logical commodity side A Product A Product Group B Logical commodity side B Product B Product Group C Logical commodity side C Product C Tier side A Description Date the rate takes effect; changes will be reflected in margin calls made on the following business date. This indicates which product group the contract on side A of the spread belongs to, this can be Oil, Gas, Power, Emissions or Coal. The TRS contract code that forms side A of the inter-commodity spread. The name of the contract that forms side A of the inter-commodity spread. This indicates which product group the contract on side B of the spread belongs to. The TRS contract code that forms side B of the inter-commodity spread. The name of the contract that forms side B of the inter-commodity spread. This indicates which product group the contract on side C of the spread belongs to. The TRS contract code that forms side C of the inter-commodity spread. The name of the contract that forms side C of the inter-commodity spread. As the inter-commodity spreads can be set differently for different expiry tiers this column indicates the tier the particular off-set applies to for side A of the spread. As above, but for side B of the spread. As above, but for side C of the spread. The percentage of the scanning range that is credited back when a position is part of an inter-commodity spread. The previous inter-commodity spread credit rate.

D E F

G H I

J K

L M N

Tier side B Tier side C New credit per leg (percentage) Old credit per leg (percentage)

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SPAN Margin Parameter Layout Guide

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Column P Q

Column heading Change Delta Ratio Periods

Description The percentage change between the new and old credit rates. The delta ratio indicates the number of lots needed for each leg to form one spread. For a Brent versus WTI spread the lot sizes are both 1,000 barrels therefore the ratio is 1 to 1. Expiries of the contract A within a particular inter-commodity tier versus expiries of contract B (and C in the case of 3-contract rates).

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SPAN Margin Parameter Layout Guide

ICE Clear Europe Limited

8 Position Allocation
File contains the details of position decomposition mapping for contracts to which Position Allocation method is applied. Position Allocation is typically used for positions in combinations and/or options on combinations where the underlying instruments of the combinations are in different physical commodities. With this feature, the position in the combination or the option on the combination is split out (allocated) into positions on the underlying instruments of the combination. A position split allocation then considers only the delta from the position in the combination or the option on the combination. This method allows a position in one product to be expressed as an equivalent set of positions in other underlying products.

Column A

Column heading Physical Code

Description Physical commodity code of the product to which Position Allocation should be applied. Type of the contract to which Position Allocation is applied (F=futures, C=call option, P=put option). The expiry date of the contract in the format YYYYMMDD. For non-daily contracts the days are displayed in the format 00. Physical commodity code of the product for which a position allocation should be created Type of the created allocated contract (F=futures, C=call option, P=put option). The expiry date of the allocated contract in the format YYYYMMDD. For non-daily contracts the days are displayed in the format 00. The number of positions created in the Mapped contract from 1 lot of original position in the Physical Code

Contract Type

Expiry

Mapped Physical Code

Mapped Contract Type

Mapped Expiry

Decomposition Factor

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SPAN Margin Parameter Layout Guide

ICE Clear Europe Limited

9 Acceptable Collateral List

File contains the list of acceptable government securities, ISIN's and applicable haircuts.

Column A B C D E F G H I J K L

Column heading Date of last review Security Unique Bloomberg Identifier Bloomberg Ticker ID_ISIN Currency Coupon Coupon Type Maturity Maturity Type Years To Maturity Haircut

Description Date when Acceptable Collateral list was last updated Name of Government Security Unique identifier assigned by Bloomberg to all securities Abbreviation assigned to a security for trading purposes Internal Security Identification number Currency in which the security was issued Current interest rate of security Type of interest to be paid to investors Date when the principal of a security is due and payable Displays bonds structure Time to maturity in years The percentage haircut applied to each security of specific maturity

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SPAN Margin Parameter Layout Guide

ICE Clear Europe Limited

10 Deliverable Contracts Security Rates

This file contains the security rates applicable to positions in delivery together with the timing of when the security will be called.
Column A Column heading Effective Date Description Date the rate takes effect; changes will be reflected in margin calls made on the following business date. TRS contract code. Name of contract. Indicates the amount the seller has to lodge in respect of a position in delivery. For Gas oil there is no seller security requirement. Indicates the amount the buyer has to lodge in respect of a position in delivery. This indicates the first day on which security is called. Currency of the contract.

B C D

Logical Commodity Contract Name Seller Security (per lot)

E F G

Buyers Security Security Called Currency

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