Intercontinental Exchange Launches Clearing for CDS Index Options
November 09 2020 - 8:30AM
Business Wire
Extends Monte Carlo Portfolio Framework to
Higher Order CDS Derivatives
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator
of global exchanges and clearing houses and provider of mortgage
technology, data and listings services, today announced it has
launched clearing for Credit Default Swap (CDS) Index Options,
bringing greater capital efficiencies, price discovery and risk
management to the CDS market. Beginning today, ICE Clear Credit now
offers clearing of Index Options on the CDX North American
Investment Grade and High Yield indices. Index Options on the
iTraxx Europe indices are expected to be added in 2021.
ICE Clear Credit’s Index Options solution provides a number of
innovations including a common exercise-and-assignment platform
where all market participants, dealers and buy-side, can perform
time-critical decision making in a centralized, risk-managed and
technologically advanced fashion. To establish a robust and
transparent price discovery process, ICE Clear Credit uses an
extension of its current end-of-day approach to Single Name and
Index clearing to determine executable mark-to-market levels for
CDS Index Options and provide convenient access to these daily
prices.
“The launch of CDS Index Options leverages ICE’s market
infrastructure and robust risk management methodology and builds on
the tremendous momentum we’ve seen across our CDS complex,” said
Stan Ivanov, President of ICE Clear Credit. “By incorporating Index
Options into our existing capital efficient risk management
approach to CDS clearing, we’re bringing new tools to our customers
to access the CDS market, and to execute cost-effective and
versatile strategies to manage risk.”
“In close consultation with market participants, ICE Clear
Credit is introducing CDX options clearing which will enhance
standardization and transparency in the market,” said Amy Hong,
Head of Market Structure Strategy for the Global Markets Division
at Goldman Sachs. “The offering is intended to drive efficiencies,
improve risk management and further promote the product.”
To help determine margin levels across portfolios, customers can
use ICE’s state-of-the-art CDS risk management system, PACE, which
leverages a Monte Carlo simulation framework and provides
significant improvements over common modelling practices. Index,
Single Name and Index Option instruments are analyzed and managed
through the same general CDS portfolio framework computing
consistent, efficient and reliable risk measures.
“Clearing CDS index options is an exciting development for the
CDS market. Cross-margining across indices and options, and ICE
Clear Credit’s exercise-and-assignment platform should bring about
capital efficiencies and enhance operational risk management on
expiry dates,” said Ali Balali, Managing Director in the Global
Credit group at BofA Securities.
Through the third quarter of 2020, ICE Clear Credit cleared
nearly $25 trillion two-sided notional amount of CDS instruments,
representing and 11% growth over the same period in 2019. ICE Clear
Credit is on track to achieve record index volumes in 2020 for both
its dealer and client cleared business, having exceeded in the
third quarter of 2020 the total index notional amount cleared
during all of 2019. Additionally, the Single Name notional amount
cleared at ICE Clear Credit has significantly grown each year since
2015, driven by sovereign Single Names and Single Names referencing
corporate entities domiciled outside of North America.
Launched in 2009, ICE Clear Credit and ICE Clear Europe CDS
clearing solutions offer clearing for more than 500 Single Name and
Index CDS instruments based on corporate and sovereign debt and
have reduced counterparty risk exposure by clearing over $283
trillion in two-sided notional amount, with combined open interest
of approximately $2.0 trillion.
For more information about ICE Clear Credit, please visit:
https://www.theice.com/credit-derivatives/options.
About Intercontinental Exchange
Intercontinental Exchange (NYSE: ICE) is a Fortune 500 company
and provider of marketplace infrastructure, data services and
technology solutions to a broad range of customers including
financial institutions, corporations and government entities. We
operate regulated marketplaces, including the New York Stock
Exchange, for the listing, trading and clearing of a broad array of
derivatives contracts and financial securities across major asset
classes. Our comprehensive data services offering supports the
trading, investment, risk management and connectivity needs of
customers around the world and across asset classes. As a leading
technology provider for the U.S. residential mortgage industry, ICE
Mortgage Technology provides the technology and infrastructure to
transform and digitize U.S. residential mortgages, from application
and loan origination through to final settlement.
Trademarks of ICE and/or its affiliates include Intercontinental
Exchange, ICE, ICE block design, NYSE and New York Stock Exchange.
Information regarding additional trademarks and intellectual
property rights of Intercontinental Exchange, Inc. and/or its
affiliates is located at
http://www.intercontinentalexchange.com/terms-of-use. Key
Information Documents for certain products covered by the EU
Packaged Retail and Insurance-based Investment Products Regulation
can be accessed on the relevant exchange website under the heading
“Key Information Documents (KIDS).”
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995 -- Statements in this press release regarding
ICE's business that are not historical facts are "forward-looking
statements" that involve risks and uncertainties. For a discussion
of additional risks and uncertainties, which could cause actual
results to differ from those contained in the forward-looking
statements, see ICE's Securities and Exchange Commission (SEC)
filings, including, but not limited to, the risk factors in ICE's
Annual Report on Form 10-K for the year ended December 31, 2019, as
filed with the SEC on February 6, 2020.
ICE-CORP
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version on businesswire.com: https://www.businesswire.com/news/home/20201109005363/en/
ICE Media Contact: Damon Leavell Damon.Leavell@theice.com
212-323-8587 ICE Investor Contact: Warren Gardiner
Warren.Gardiner@theice.com 770-835-0114
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