ICE’s Clearinghouse Had $1 Billion Margin Breach Last Year

Author of the article: Bloomberg News Alex Longley (Bloomberg) — ICE Clear Europe saw a margin breach of just over $1 billion in the final quarter of 2021, highlighting the risks roiling commodity markets even before Russia invaded Ukraine.  The breach in the clearing arm of the Intercontinental Exchange Inc. totaled $1.03 billion, according to…
ICE’s Clearinghouse Had $1 Billion Margin Breach Last Year

Author of the article:

Bloomberg News

Alex Longley

(Bloomberg) — ICE Clear Europe saw a margin breach of just over $1 billion in the final quarter of 2021, highlighting the risks roiling commodity markets even before Russia invaded Ukraine. 

The breach in the clearing arm of the Intercontinental Exchange Inc. totaled $1.03 billion, according to disclosures the company made earlier this month. It came in a period when natural gas prices in Europe spiked to a then record, and in which oil markets were also highly volatile.

The figure represents the largest exposure in any single member account over the period. It was also the second-largest on record for ICE Clear Europe. 

Margin breaches happen when the marked-to-market exposure of a clearinghouse member’s account exceeds the initial margin held against that account.

There is no indication that the margin call wasn’t met, or that any financial difficulty ensued. However, it underscores the enormous costs and risks some traders have faced because of unprecedented commodity market volatility. 

Since then, the stresses on commodity trading have grown — as have margin requirements. 

After the invasion of Ukraine, bourses hiked margins across the commodity sector as the value of key products like Brent crude and natural gas surged again, moving far beyond levels seen at the end of 2021. 

Last month, Europe’s energy traders were lobbying central banks and governments for urgent funding after facing cash-calls running into the billions of dollars due to soaring commodity prices. 

ICE declined to comment.

©2022 Bloomberg L.P.

Bloomberg.com

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