Exchanges & Clearing/Margining & Tech/ICE Risk Model 2/Frequently Asked Questions

Frequently Asked Questions

Whether you're a new customer seeking information or an existing user looking for clarification, this comprehensive resource is here to provide you with clear and concise answers. From troubleshooting common issues to exploring product features, we aim to assist you in navigating your queries effortlessly. Our team has curated this collection of frequently asked questions to ensure you have all the information you need.

Overview

Methodology

ICE Clearing Analytics

Connecting to IRM 2

What is IRM 2?

ICE Risk Model 2 (IRM 2) is the new initial margining (IM) model developed by ICE to replace the existing ICE Risk Model (IRM 1) for exchange traded futures and options. IRM 2 utilizes a Filtered Historical Simulation Value at Risk (VaR) approach to measure portfolio risk more accurately and consistent with portfolio P&L.

Will IRM 2 be employed across all ICE Clearing Houses?

IRM 2 will be rolled out across product groups and ICE Clearing Houses in discrete implementation phases. The first implementation of IRM 2 was for Equity Index Futures, cleared at ICE Clear U.S. The second phase will cover Energy products cleared at ICE Clear Europe. Subsequent phases will extend its use to other product groups and other ICE Clearing Houses.

ICE’s CDS services operated by ICE Clear Credit will continue to utilize the existing CDS margin methodology.

How can I calculate IRM 2 margins?

There are several options:

Web-based User Interface

ICE Clearing Analytics (ICA) allows users to upload portfolios, run interactive margin calculations and view detailed margin reports. Register for an ICA account

Clearing Member Reports

Margin reports, containing a breakdown of the key IRM 2 margin components, are published during end of day clearing. Register for an ICE Service Community account to access the Clearing Member Report Specification

Margin API

ICE will provide a REST API that can be used to run margin calculations for portfolios that are supplied in request messages. Please note that the API is not intended for high frequency or low latency applications.

Service Provider

A list of approved vendors who provide IRM 2 margin calculation services is available here. If you wish to use a vendor that is not on the list, please contact the vendor to ensure they are aware of the IRM 2 Project.

In-house Replication

Users who wish to replicate the margin calculation in-house can implement the model locally. Developer resources, including an External Developer Guide, Input Data File Specification and Reference implementation are available here

What tools will be available to my Customers?

ICE is providing ICE Clearing Analytics (ICA), a web-based calculator UI for initial margin analysis through which portfolios can be submitted and margin results obtained.

Do I need to obtain and load IRM 2 risk array files into ICE Clearing Analytics (ICA)?

No, ICA does not require any additional input from the user to calculate IRM 2 margin values aside from the portfolios they wish to analyze. Furthermore, ICA also automatically retrieves and loads the appropriate risk arrays for IRM 1 supported products.

Does IRM 2 include a measure of liquidity risk or position concentration risk?

Yes, IRM 2 contains a Liquidity Risk Charge (LRC) in the model. The LRC is comprised of separate ‘Bid/Ask’ and ‘Concentration’ charge components.

I am an FCM or General Clearing Member and I already make a GCM submission; can I use this to get my Customer Margin Requirements?

Yes. For customer positions held in gross-margined accounts, the margins calculated by the Clearing House are published during end of day clearing and can be used by members in their back-office.

GCM positions can also be loaded into the ICE Portfolio Analytics (ICA) tool, which can be used to calculate margins for customer positions held in net-margined accounts.

What is the schedule for IRM 2 implementation?

ICE Equity Index Futures cleared at ICE Clear U.S. went live under IRM 2 on January 24, 2022. The next implementation of IRM 2 will be for Energy futures and options cleared at ICE Clear Europe and rollout to other products will follow in successive stages. As dates for each implementation are confirmed, timelines will be provided in the Implementation Approach section on the overview page.

Does IRM 2 calculate different IM values for long and short positions?

Yes, IRM 2 estimates potential losses on long and short positions separately.

How often are the IRM 2 IM values updated?

The model calculates new IM values after each valid clearing business date enabling the model to be reactive to current market conditions.

Does IRM 2 only apply to Europe products or US Power products as well?

IRM 2 is being introduced to all energy products cleared by ICE Clear Europe. This applied to all products listed under the following Exchanges: ICE Futures Abu Dhabi (IFAD); ICE Futures U.S. Energy Divisions (IFED); ICE Futures Europe (IFEU); and ICE Endex Futures (ENDEX).

Is the current IRM 1 margin application compatible with IRM 2?

No, the current IRM 1 margin application will not be able to calculate IRM 2 margins. The new web based tool ICE Clearing Analytics (ICA) will be capable of calculating IRM 1 and IRM 2 margins and therefore replaces the IRM 1 application.

When will margin reports be available for the initial go-live product set?

Margin reports for the initial go-live product set Freight, will be made available from June 2024 in the external parallel run.

Will the Margin API be available to end-users?

Margin API will be available to all participants. There will be cost associated with using Margin API for non-Clearing Member participants and will also require you to sign Licence agreement.

What is conformance testing and who needs to do it?

Conformance testing is required for any Clearing Members or Service Providers intending to replicate the IRM 2 margin model. For the initial energy products conformance testing window is open now until the go-live. It is recommended however that all conformance testing is completed by May 2024.