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07 APRIL 2017 CIRCULAR C17/052 ENERGY CLEARING: LOT SIZE CONVERSION FOR CERTAIN ICE FUTURES US NORTH AMERICAN POWER CONTRACTS CATEGORY General ATTACHMENTS None Subject to the completion of the relevant regulatory processes, ICE Futures U.S. (the “Exchange”) intends to convert the contract size of certain ICE Futures US North American Power contracts from a fixed contract size (e.g. 800MWh) to a variable contract size based on the power profile and the number of hourly or daily cycles in that month for the given profile (hereafter the “Power Conversion”). The Power Conversion will involve a change to the value of the contract size from fixed to variable and a simultaneous refactoring of the open interest that will amend open interest by an equivalent ratio such that the notional value of the outstanding positions remain constant. ICE Clear Europe (the “Clearing House”) will make these changes following the clearing EOD on Friday 05 May 2017, with an effective date of Monday 08 May 2017. Following the contract size conversion and open interest refactoring, the Exchange will migrate open interest in existing variable lot size contracts to the newly converted contracts. This is scheduled to occur following the clearing EOD on Friday 12 May 2017, with an effective date of Monday 15 May 2017. The Exchange will also implement conforming changes to the Exchange and Clearing Fees, Spot Month Position Limits, Position Accountability and Reportable Levels and Block Trade Minimum Quantities to reflect the size conversion for each affected futures and option contract. Further details of these changes can be found in the Exchange Notice dated Tuesday 28 March 2017. Affected Contracts The list of the ICE Futures US North American Power Contracts (“Affected Contracts”) impacted by this change, conversion factors and the updated contract sizes is available on ICE Community and at Appendix 1. Margin Rates In anticipation of the Contract Size conversion, the Clearing House will amend the current delta divisor for the Affected Contracts. The delta divisor is used to scale a contract’s delta and set the unit size for intermonth spread charges. The updated delta divisors will be effective from close of business on Monday 10 April 2017. This change will have an immaterial margin impact. A test SPAN® file with these changes is available in MFT via the /pub/span/test folder with the following file name: RiskArrays_I_20170130_Delta_Divisor_Change_V3.zip View All Circulars / Subscribe / Media Inquiries ICE Clear Europe Ltd, a Recognised Clearing House under the Financial Services & Markets Act 2000 Registered in England & Wales with Registered Office at Milton Gate, 60 Chiswell Street, London, EC1Y 4SA Company Registration No. 6219884 1 As a result of the Contract Size conversion, the SPAN® margin parameters will be updated for the Affected Contracts. The changes are effective from close of business on Monday 08 May 2017 and will be reflected in margin calls made on Tuesday 09 May 2017. The updated rates will be published on Friday 28 April 2017 and Clearing Members should refer to the margin parameter link below to verify changes to these rates. All other SPAN® margin parameters remain unchanged. The updated margin parameters will be available here. Migration Phase 1 - Contract Size Conversion and Open Interest Refactoring Following the Clearing House’s EOD processing on Friday 05 May 2017, the Clearing House will adjust the open interest in the affected contracts by a pre-determined conversion factor. The list of the Affected Contracts, conversion factors and the updated contract sizes is available on ICE Community. This change will be carried out as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9. Friday 05 May 2017 - prior to the conversion: Final PCS instructions in the GCM File should be on the unconverted positions. The EOD Match-off File and EOD Clearing reports for close of business Friday 05 May 2017 will contain position prior to the conversion. The Risk Arrays published will contain the pre-conversion margin rates, contract sizes and delta divisors. EMIR Transaction reports will be on the unconverted trades and positions. The Product (GSPD) and Contract (GSCD) reference data files published will contain the post-conversion lot size and contract sizes. Saturday 06 May 2017 - Following the conversion Following the conversion, ICE will publish the Conversion Reconciliation report (MPCONV) to the following MFT location: member/positions/XXX_MPCONV_YYYYMMDD.csv where the date is the business date following the EOD (i.e. XXX_MPCONV_20170508.csv). These files will be available by 09:00 London time. Sunday 07 May 2017 ICE Clear Europe will publish a converted Risk Array file to MFT in /pub/span/test with the following file name: RiskArrays_I_20170506_Power_Conversion_Change.zip This file will be available by 07:00 London time. Monday 08 May 2017 - Effective Day Next Day T+1 corrections on trades cleared prior to the conversion will not be permitted. Instead corrections should be effected via position transfers. The EOD Match-off File and EOD Clearing reports for close of business Monday 08 May 2017 will contain the converted positions. Similarly Product (GSPD) and Contract (GSCD) reference data files published will contain the updated lot size and contract sizes. 1 SPAN is a registered trademark of Chicago Mercantile Exchange Inc., used herein under license. Chicago Mercantile Exchange Inc. assumes no responsibility in connection with the use of SPAN by any person or entity. SPAN is a risk evaluation and margin framework algorithm. View All Circulars / Subscribe / Media Inquiries ICE Clear Europe Ltd, a Recognised Clearing House under the Financial Services & Markets Act 2000 Registered in England & Wales with Registered Office at Milton Gate, 60 Chiswell Street, London, EC1Y 4SA Company Registration No. 6219884 10. EMIR Transaction reporting for COB Monday 08 May 2017 will be on the converted positions. Clearing Members are reminded that any pre-migration post trade management actions on Affected Contracts at the Clearing House level and internally between client accounts should be processed at the correct traded lot size to ensure that positions can be converted into whole lots during Phase 1. Any actions that would result in an odd lot position at the Clearing House level following the conversion must be reversed before the Clearing House can proceed with the conversion. If you are unsure of the implications of any post trade activity on the Affected Contracts please contact Clearing Operations for clarification. Phase 2 - Product Migration Following the completion of the refactoring in Phase 1, the converted products will be duplicates of the existing variable lot size products. As such, this phase involves the migration of the open interest from the existing 1MW products ("Source Products"), where they exist, to the newly converted products ("Destination Products"), followed by a delisting of the existing variable lot size products. A mapping of the source and Destination Products is available in the Exchange Notice and ICE Community. 1. 2. 3. 4. 5. Friday 12 May 2017 - prior to the migration Final PCS in the GCM file should be reported for positions in both the Source and Destination Products. The EOD Match-off File and EOD Clearing reports for close of business Friday 12 May 2017 will contain position data for both the Source and Destination Products. EMIR Transaction Reporting for close of business Friday 12 May 2017 will contain positions for both Source and Destination Products. Following the close of trading, the source products will be suspended from trading in preparation for the delisting. Saturday 13 May 2017 Clearing Members will be provided with the following files to assist with reconciliations: – MPMSP - Migration Positions Projected • CSV report which details all positions which will be migrated • MFT directory: /<firm>/clearing/positions • MFT report name: XXX_MPMSP_YYYYMMDD.csv – MPMP - Migration Positions • a CSV report which details all positions which have been migrated • MFT ultimate directory: /<firm>/clearing/positions/ • MFT report name: XXX_MPMP_YYYYMMDD.csv These reports will be available by 09:00 London time on Saturday 13 May 2017. 6. 7. 8. Monday 15 May 2017 Match-off file will not contain positions for the Source Contracts - these are now 0. EMIR Transaction Reporting for COB Monday 15 May 2017 will include the updated positions in the Destination Products and a 0 value for positions in the Source Products. Tuesday 16 May 2017 The Source Products will be expired in the clearing system to complete the delisting process. View All Circulars / Subscribe / Media Inquiries ICE Clear Europe Ltd, a Recognised Clearing House under the Financial Services & Markets Act 2000 Registered in England & Wales with Registered Office at Milton Gate, 60 Chiswell Street, London, EC1Y 4SA Company Registration No. 6219884 Testing The Clearing House will make available the reconciliation files from each phase ahead of the migration. 1. Phase 1: The MPCONV test files will be made available on Monday 10 April 2017 using test data from close of business Tuesday 14 February 2017. These files will be available in MFT in the /notices folder with the following file name: XXX_MPCONV_20170215.csv In addition, a test SPAN® file will be made available with the updated contract sizes. This will be available using margin rates that were effective on Tuesday 14 February 2017 and is provided to allow Clearing Members to test the updated contract sizes in the SPAN® file. This should not be used to perform a margin impact analysis as it will not contain the updated margin rates that will be effective during the EOD on Monday 08 May 2017. The test SPAN file will be available in MFT in the /pub/span/test folder with the following file name: RiskArrays_I_20170214_Power_Conversion.zip 2. Phase 2 - the MPMSP and MPMP test files will be made available on Monday 17 April 2017, using test data from close of business Thursday 16 February 2017. These files will be available in the MFT/notices folder with the following file names: XXX_MPMP_ 20170216.csv XXX_MPMSP_20170216.csv This migration of open interest will lead to a change to the terms of open positions in the Destination Products in place between the Clearing House and relevant Clearing Members. This change will be made by the Clearing House in accordance with its rights under Rule 109 (b)(viii). Further, no payments shall be made under Rule 109 (k) in connection with this change. Should you have any questions in relation to this Circular or require any further information, please contact ICE Clear Europe Operations by phone on +44 (0)20 7065 7600 or by email [email protected]. Please ensure that the appropriate members of staff within your organisation and customers are advised of the content of this Circular. Signed: Paul Swann President & Managing Director FOR MORE INFORMATION, PLEASE CONTACT: Nazareen Noor Mahomed Director of Energy Clearing Development +44 (0)20 7065 7606 [email protected] View All Circulars / Subscribe / Media Inquiries ICE Clear Europe Ltd, a Recognised Clearing House under the Financial Services & Markets Act 2000 Registered in England & Wales with Registered Office at Milton Gate, 60 Chiswell Street, London, EC1Y 4SA Company Registration No. 6219884 Marc Thomas Director, ETD Settlements, Operations +44 (0)20 7065 7629 [email protected] Energy Risk Help Desk +44 (0)20 7065 7630 [email protected] Operations Help Desk +44 (0)20 7065 7600 [email protected] View All Circulars / Subscribe / Media Inquiries ICE Clear Europe Ltd, a Recognised Clearing House under the Financial Services & Markets Act 2000 Registered in England & Wales with Registered Office at Milton Gate, 60 Chiswell Street, London, EC1Y 4SA Company Registration No. 6219884 Appendix 1: Affected Contracts Contract Name Commodity Code Old Contract Size New Contract Size CAISO NP-15 Day-Ahead Peak Fixed Price Future NPM 400MWh 1MW CAISO NP-15 Day-Ahead Off-Peak Fixed Price Future ONP 25MWh 1MW CAISO SP-15 Day-Ahead Off-Peak Fixed Price Future OFP 25MWh 1MW CAISO SP-15 Day-Ahead Peak Fixed Price Future SPM 400MWh 1MW Option on CAISO SP-15 Day-Ahead Peak Fixed Price Future SPM 400MWh 1MW ERCOT Houston 345KV Real-Time Peak Fixed Price Future ERH 800MWh 1MW ERCOT North 345KV Real-Time Peak Fixed Price Future ERN 800MWh 1MW Option on ERCOT North 345KV Real-Time Peak Fixed Price Future ERN 800MWh 1MW ERCOT South 345KV Real-Time Peak Fixed Price Future ERS 800MWh 1MW ERCOT West 345KV Real-Time Peak Fixed Price Future ERW 800MWh 1MW NEX 800MWh 1MW NEX 800MWh 1MW ISO New England Massachusetts Hub Day-Ahead Peak Fixed Price Future NEP 800MWh 1MW Option on ISO New England Massachusetts Hub Day-Ahead Peak Fixed Price Future NEP 800MWh 1MW ISO New England Massachusetts Hub Day-Ahead Off-Peak Fixed Price Future NOP 50MWh 1MW Mid-Columbia Day-Ahead Peak Fixed Price Future MDC 400MWh 1MW Option on Mid-Columbia Day-Ahead Peak Fixed Price Future MDC 400MWh 1MW Mid-Columbia Day-Ahead Off-Peak Fixed Price Future OMC 25MWh 1MW MISO Indiana Hub Real-Time Peak Fixed Price Future CIN 800MWh 1MW Option on MISO Indiana Hub Real-Time Peak Fixed Price Future CIN 800MWh 1MW MISO Indiana Hub Real-Time Off-Peak Fixed Price Future CPO 50MWh 1MW NYISO Zone A Day-Ahead Off-Peak Fixed Price Future AOP 50MWh 1MW NYISO Zone A Day-Ahead Peak Fixed Price Future NAY 800MWh 1MW Option on NYISO Zone A Day-Ahead Peak Fixed Price Future NAY 800MWh 1MW NYISO Zone G Day-Ahead Off-Peak Fixed Price Future NGO 50MWh 1MW NYISO Zone G Day-Ahead Peak Fixed Price Future NGY 800MWh 1MW Option on NYISO Zone G Day-Ahead Peak Fixed Price Future NGY 800MWh 1MW NYISO Zone J Day-Ahead Off-Peak Fixed Price Future NJO 50MWh 1MW ISO New England Massachusetts Hub Day-Ahead Peak Calendar Year One Time Fixed Price Future Calendar One Time Option on ISO New England Massachusetts Hub Day-Ahead Peak Calendar Year One Time Fixed Price Future View All Circulars / Subscribe / Media Inquiries ICE Clear Europe Ltd, a Recognised Clearing House under the Financial Services & Markets Act 2000 Registered in England & Wales with Registered Office at Milton Gate, 60 Chiswell Street, London, EC1Y 4SA Company Registration No. 6219884 NYISO Zone J Day-Ahead Peak Fixed Price Future NJY 800MWh 1MW Palo Verde Day-Ahead Off-Peak Fixed Price Future OVP 25MWh 1MW Palo Verde Day-Ahead Peak Fixed Price Future PVM 400MWh 1MW PJM AEP Dayton Hub Real-Time Off-Peak Fixed Price Future AOD 50MWh 1MW Option on PJM AEP Dayton Hub Real-Time Off-Peak Fixed Price Future AOD 50MWh 1MW PJM AEP Dayton Hub Real-Time Peak Fixed Price Future MSO 800MWh 1MW Option on PJM AEP Dayton Hub Real-Time Peak Fixed Price Future MSO 800MWh 1MW PJM NI Hub Real-Time Off-Peak Fixed Price Future NIO 50MWh 1MW PJM Western Hub Real-Time Off-Peak Calendar Year One Time Fixed Price Future PWC 50MWh 1MW Calendar One Time Option on PJM Western Hub Real-Time Off-Peak Calendar Year One Time Fixed Price Future PWC 50MWh 1MW PJM Western Hub Real-Time Off-Peak Fixed Price Future OPJ 50MWh 1MW Option on PJM Western Hub Real-Time Off-Peak Fixed Price Future OPJ 50MWh 1MW PJM NI Hub Real-Time Peak Fixed Price Future PNL 800MWh 1MW View All Circulars / Subscribe / Media Inquiries ICE Clear Europe Ltd, a Recognised Clearing House under the Financial Services & Markets Act 2000 Registered in England & Wales with Registered Office at Milton Gate, 60 Chiswell Street, London, EC1Y 4SA Company Registration No. 6219884