Clearing Organizations

We operate regulated central counterparty clearing houses for the settlement and clearance of derivative contracts. The clearing houses include ICE Clear Europe, ICE Clear Credit, ICE Clear U.S., ICE Clear Canada, ICE Clear Netherlands, ICE Clear Singapore and NGX (referred to herein collectively as the “ICE Clearing Houses”).


•	ICE Clear Europe performs the clearing and settlement for all futures and options contracts traded through ICE Futures Europe and ICE Endex, for energy futures and options contracts trading through ICE Futures U.S., and for CDS contracts submitted for clearing in Europe.


•	ICE Clear Credit performs the clearing and settlement for CDS contracts submitted for clearing in North America.


•	ICE Clear U.S. performs the clearing and settlement of agricultural, metals, currencies and financial futures and options contracts traded through ICE Futures U.S.


•	ICE Clear Canada performs the clearing and settlement for all futures and options contracts traded through ICE Futures Canada.


•	ICE Clear Netherlands offers clearing for Dutch equity options.


•	ICE Clear Singapore performs the clearing and settlement for all futures and options contracts traded through ICE Futures Singapore.


•	NGX performs clearing and settlement for North American natural gas, electricity and oil markets and was acquired in December 2017 (Note 3).

Each of the ICE Clearing Houses requires all clearing members or participants to maintain cash on deposit or pledge certain assets, which may include government obligations, non-government obligations, letters of credit or gold to guarantee performance of the clearing members’ or participants’ open positions. Such amounts in total are known as “original margin.” The ICE Clearing Houses may make intraday original margin calls in circumstances where market conditions require additional protection. The daily profits and losses from and to the ICE Clearing Houses due to the marking-to-market of open contracts is known as “variation margin.” With the exception of NGX’s physical natural gas and physical power products, the ICE Clearing Houses mark all outstanding contracts to market, and therefore pay and collect variation margin, at least once daily, and in some cases multiple times throughout the day. For NGX’s physical natural gas and power products, NGX marks all outstanding contracts to market daily, but only collects variation margin when a participant’s open position falls outside a specified percentage of its pledged collateral. Marking-to-market allows the ICE Clearing Houses to identify any clearing members or participants that may be unable to satisfy the financial obligations resulting from changes in the prices of their open contracts before those financial obligations become exceptionally large and jeopardize the ability of the ICE Clearing Houses to ensure financial performance of clearing members’ or participants’ open positions.

With the exception of NGX, each of the ICE Clearing Houses requires that each clearing member make deposits into a fund known as a “guaranty fund,” which is maintained by the relevant ICE Clearing House. These amounts serve to secure the obligations of a clearing member to the ICE Clearing House to which it has made the guaranty fund deposit and may be used to cover losses sustained by the respective ICE Clearing House in the event of a default of a clearing member. NGX maintains a guaranty fund utilizing a $100 million letter of credit that has been entered into with a major Canadian chartered bank and backed by a default insurance policy underwritten by Export Development Corporation, or EDC, a Canadian government agency. In event of a participant default, where a participant’s collateral becomes depleted, any remaining shortfall would be covered by a draw down on the letter of credit following which NGX would pay the first $15 million in losses per its deductible and recover additional losses under the insurance policy up to $100 million. We have provided a parent guaranty of $100 million in favor of the major Canadian chartered bank and we voluntarily reserved $100 million of our Amended Credit Facility to backstop that parent guaranty (Note 11).

We have contributed cash of $150 million, $50 million and $50 million to the guaranty funds of ICE Clear Europe, ICE Clear Credit and ICE Clear US, respectively, as of December 31, 2017, and such amounts are at risk and could be used in the event of a clearing member default where the amount of the defaulting clearing member’s original margin and guaranty fund deposits are insufficient. We have also contributed $4 million in cash in total to the guaranty funds of ICE Clear Canada, ICE Clear Netherlands and ICE Clear Singapore. The $254 million combined contributions to the guaranty funds as of December 31, 2017 and 2016 are included in long-term restricted cash and cash equivalents in the accompanying consolidated balance sheets (Note 5).

For ICE Clear Europe, if a futures and options clearing member’s deposits are depleted and a default occurs, then a $100 million contribution made by us to the ICE Clear Europe guaranty fund would be utilized after the available funds of the defaulting clearing member but before all other amounts within the guaranty fund. The $100 million is solely available in the event of an ICE Clear Europe futures and options clearing member default. We have contributed $50 million to the ICE Clear Europe CDS guaranty fund and it would be utilized after the available funds of the defaulting CDS clearing member but before all other amounts within the CDS guaranty fund. The $50 million contribution to the ICE Clear U.S. guaranty fund and the $50 million contribution to the ICE Clear Credit guaranty fund would be utilized after the available funds of the defaulting clearing member but before all other amounts within the guaranty fund.

Each of the ICE Clearing Houses has equal and offsetting claims to and from their respective clearing members or participants on opposite sides of each cleared contract. This arrangement allows the ICE Clearing Houses to serve as the central financial counterparty on every cleared contract. Each ICE Clearing House bears financial counterparty credit risk in the event that market movements create conditions that lead to its clearing members or participants failing to meet their financial obligations to that ICE Clearing House. Accordingly, the ICE Clearing Houses account for this central counterparty guarantee as a performance guarantee. Given that each contract is margined and marked-to-market or settled at least once daily for each clearing member, or in the case of NGX, collateralized for each participant, the ICE Clearing Houses’ maximum estimated exposure for this guarantee, excluding the effects of original and variation margin requirements and mandatory deposits to the applicable guaranty fund by clearing members and collateral from its participants, is $78.3 billion as of December 31, 2017, which represents the maximum estimated value by the ICE Clearing Houses of a hypothetical one day movement in pricing of the underlying unsettled contracts. This amount is based on calculations determined using proprietary risk management software that simulates gains and losses based on historical market prices, volatility and other factors present at that point in time for those particular unsettled contracts. Future actual market price volatility could result in the exposure being significantly different than the amount estimated by the ICE Clearing Houses. The net notional value of unsettled contracts was $2.6 trillion as of December 31, 2017. We performed calculations to determine the fair value of our counterparty performance guarantee taking into consideration factors such as daily settlement of contracts, margining and collateral requirements, other elements of our risk management program, historical evidence of default payments, and estimated probability of potential default payouts by the ICE Clearing Houses. Based on these analyses, the estimated counterparty performance guaranty liability was determined to be nominal and no liability was recorded as of December 31, 2017 and 2016.

The ICE Clearing Houses seek to reduce their exposure through a risk management program that includes initial and ongoing financial standards for clearing member and participant admission and continued membership, original and variation margin and collateral requirements, and mandatory deposits to the guaranty fund. The amounts that the clearing members and participants are required to maintain in the original margin, guaranty fund and collateral accounts are determined by standardized parameters established by the risk management departments and reviewed by the risk committees and the boards of directors of each of the ICE Clearing Houses and may fluctuate over time. As of December 31, 2017 and 2016, the ICE Clearing Houses have received or have been pledged $92.6 billion and $95.7 billion, respectively, in cash and non-cash collateral in original margin and guaranty fund deposits to cover price movements of underlying contracts for both periods. With the exception of NGX, the ICE Clearing Houses also have powers of assessment that provide the ability to collect additional funds from their clearing members to cover a defaulting member’s remaining obligations up to the limits established under the respective rules of each ICE Clearing House.

Should a particular clearing member or participant fail to deposit original margin, provide collateral, or fail to make a variation margin payment, when and as required, the relevant ICE Clearing House may liquidate or hedge the clearing member’s or participant’s open positions and use their original margin and guaranty fund deposits to make up any amount owed. In the event that those deposits are not sufficient to pay the amount owed in full, the ICE Clearing Houses may utilize the respective guaranty fund deposits of their respective clearing members on a pro-rata basis for that purpose.

NGX administers the physical delivery of energy trading contracts. It has an equal and offsetting claim to and from their respective participants on opposite sides of the physically settled contract. The balance related to delivered but unpaid contracts is reflected as a delivery contract net receivable with an offsetting delivery contract net payable in the accompanying consolidated balance sheet as of December 31, 2017. NGX also records unsettled variation margin equal to the fair value of open energy trading contracts as of the balance sheet date. Fair value is determined based on the difference between the trade price when the contract was entered into and the settlement price and is considered a Level 2 fair value measurement. There is no impact to the consolidated statements of income for either delivery contracts receivable/payable and unsettled variation margin, as an equivalent amount is recognized in both the assets and liabilities.

In connection with the NGX physical delivery of the energy trading contracts, we maintain a daylight liquidity facility with a major Canadian chartered bank in the amount of C$300 million. This facility may be used on settlement day to effect payments through the settlement accounts and it is intended to cover any intra-day shortfalls due to timing of payments and receipts. In the event that amounts drawn on settlement day do not clear to zero by the end of the day, we must repay the deficiency on the following business day. In addition, a C$20 million overdraft facility is in place with the same major Canadian chartered bank and is available to repay the daylight liquidity facility on the business day following a settlement day.

As of December 31, 2017, our cash margin deposits, unsettled variation margin, guaranty fund and delivery contracts receivable/payable are as follows for the ICE Clearing Houses (in millions):



	ICE Clear Europe		ICE Clear Credit		ICE Clear U.S.		NGX		Other ICE Clearing Houses		Total
Original margin	$	19,792	$	20,703	$	3,898	$	—	$	126	$	44,519
Unsettled variation margin, net	—		—		—		227		1		228
Guaranty fund	3,037		2,607		299		—		23		5,966
Delivery contracts receivable/payable, net	—		—		—		509		—		509
Total	$	22,829	$	23,310	$	4,197	$	736	$	150	$	51,222

As of December 31, 2016, our cash margin deposits and guaranty fund are as follows for the ICE Clearing Houses (in millions):



	ICE Clear Europe		ICE Clear Credit		ICE Clear U.S.		Other ICE Clearing Houses		Total
Original margin	$	27,046	$	16,833	$	6,184	$	107	$	50,170
Guaranty fund	2,444		2,135		316		85		4,980
Total	$	29,490	$	18,968	$	6,500	$	192	$	55,150

We have recorded these cash deposits and amounts due in the accompanying consolidated balance sheets as current assets with corresponding current liabilities to the clearing members of the relevant ICE Clearing House. All cash, securities and amounts due are available only to meet the financial obligations of that clearing member to the relevant ICE Clearing House. ICE Clear Europe, ICE Clear Credit, ICE Clear US, ICE Clear Canada, ICE Clear Netherlands, ICE Clear Singapore and NGX are separate legal entities and are not subject to the liabilities of the other ICE Clearing Houses or the obligations of the members of the other ICE Clearing Houses. The amount of these cash deposits and amounts due may fluctuate due to the types of margin collateral choices available to clearing members and the change in the amount of deposits required. As a result, these assets and corresponding liabilities may vary significantly over time.

Of the cash held by the ICE Clearing Houses, as of December 31, 2017, $24.7 billion is secured in reverse repurchase agreements with primarily overnight maturities or direct investment in government securities. ICE Clear Credit, as a systemically important financial market utility as designated by the Financial Stability Oversight Council, held $18.5 billion of its U.S. dollar cash in the guaranty fund and in original margin in cash accounts at the Federal Reserve Bank of Chicago as of December 31, 2017. During the quarter ended September 30, 2017, ICE Clear Europe established a Euro-denominated account at the De Nederlandsche Bank, or DNB, the central bank of the Netherlands. This account provides the flexibility for ICE Clear Europe to place Euro-denominated cash margin securely at a national bank, in particular during periods when liquidity in the Euro repo markets may temporarily become contracted, such as over a quarter or year end. As of December 31, 2017, ICE Clear Europe held €3.3 billion ($4.0 billion based on the euro/U.S. dollar exchange rate of 1.2003 as of December 31, 2017) at DNB. The remaining cash deposits at the ICE Clearing Houses are held in demand deposit accounts at large, highly rated financial institutions and direct investments primarily in U.S. Treasury securities with original maturities of less than three months, plus certain U.S. Treasury Securities that extend beyond 12-months which we consider to be Level 1 securities. The carrying value of these securities approximates their fair value due to the short-term nature of the instruments and repurchase agreements.

Of the $22.8 billion of ICE Clear Europe cash deposits as of December 31, 2017, which are primarily held in U.S. dollars, euros and pounds sterling, $18.5 billion relates to futures and options products and $4.3 billion relates to cleared OTC European CDS instruments. ICE Clear Europe offers a separate clearing platform, risk model and risk pool for futures and options products that is distinct from those associated with cleared OTC European CDS instruments.

In addition to the cash deposits for original margin and the guaranty fund, the ICE Clearing Houses have also received other assets from clearing members, which include government obligations, and may include other non-cash collateral such as certain agency and corporate debt, letters of credit or gold to mitigate credit risk. These assets are not reflected in the accompanying consolidated balance sheets as the risks and rewards of these assets remain with the clearing members unless the ICE Clearing Houses have sold or re-pledged the assets or in the event of a clearing member default, where the clearing member is no longer entitled to redeem the assets. Any income, gain or loss accrues to the clearing member. For certain non-cash deposits, the ICE Clearing Houses may impose discount or “haircut” rates to ensure adequate collateral levels to account for fluctuations in the market value of these deposits.

NGX requires participants to maintain cash or letters of credit to serve as collateral in the event of a participant default. The cash is maintained in a segregated bank account which is subject to a collateral agreement between the bank, the participant and NGX. Per the agreement, NGX serves in the capacity of a trustee. The cash is held by NGX in trust for and on behalf of the participant; however, the cash remains the property of the participant and may only be accessed by NGX if there is evidence of default. The rules governing when the cash can be accessed by NGX are listed in the Contracting Party Agreement, a standardized agreement signed by each participant that also allows for netting of positive and negative exposure. Since the cash is held in trust and remains the property of the participant, it is not included in the accompanying consolidated balance sheet.

As of December 31, 2017 and 2016, the assets pledged by the clearing members as original margin, which includes cash deposits held in trust at NGX, and guaranty fund deposits for each of the ICE Clearing Houses are detailed below (in millions):



	As of December 31, 2017										As of December 31, 2016
	ICE Clear Europe		ICE Clear Credit		ICE Clear U.S.		NGX		Other ICE Clearing Houses		ICE Clear Europe		ICE Clear Credit		ICE Clear U.S.		Other ICE Clearing Houses
Original margin:
Government securities at face value	$	23,496	$	5,699	$	9,581	$	—	$	18	$	22,961	$	6,013	$	10,542	$	37
Letters of credit	—		—		—		1,663		—		—		—		—		—
NGX cash deposits	—		—		—		233		—		—		—		—		—
Other	—		—		—		—		—		—		—		—		368
Total	$	23,496	$	5,699	$	9,581	$	1,896	$	18	$	22,961	$	6,013	$	10,542	$	405
Guaranty fund:
Government securities at face value	$	323	$	176	$	169	$	—	$	2	$	217	$	178	$	147	$	40