ICE CDS Clearing Overview

FIA Clearing 2010 – Derivatives Forum New York • April 13, 2010

www.theice.com Global Leader in CDS Clearing

 Liquidity

 13 dealers together with leading funds and asset managers actively clearing today

 61 index contracts and 151 single names across US & Europe

 Management

 World class specifically designed for CDS

 $3 billion guaranty fund -- completely separate from all other products

 Guaranty fund sized to cover losses from simultaneous default of 2 largest clearing members

 CDS and Clearing Expertise

 Managed numerous Credit Events since launching CDS clearing

 Leading market connectivity processing thousands of CDS trades a day

 Co-administrators of ISDA Cash settlement auctions

 Ease of Doing Business

 No changes to existing OTC trade execution required

 Simple legal framework leveraging existing ISDA documentation

 Open access provided through support of multiple affirmation platforms

2 ICE CDS Milestones and Volume Cleared

ICE Global CDS Cumulative Volume

 Over 135,000 Trades Cleared ICE CDS Clearing  Open Interest of $645B Surpasses $7 Trillion  Cleared over $460MM in Buy-side Notional Globally* ICE Trust Launches Buy-side Clearing ICE Trust/ICE Clear Europe Clear Single Names

ICE Trust Surpasses $3 Trillion

ICE Clear Europe Launches CDS

In Billions In Clearing

ICE Trust Launches CDS Clearing

* As of April 9th, 2010. Visit www.theice.com/ice_trust for most recent total.

3 Why Clear CDS Through ICE?

 Gross held at clearing house NOT at DCM MARGIN  Default protections designed to work within existing bankruptcy laws PROTECTION  Separate swaps and futures guaranty funds

 Position and collateral linkage facilitates pre and post default DCM transfer PORTABILITY  Timely and operationally simple transfer in the event of a default  Contingency planning allows establishment of new DCM prior to default

 Governance structure includes independent board INDEPENDENCE  Margin calculated using independent EOD pricing process  ICE margin requirements transparent to buy-side

 Trades cleared intra-day, on near real-time basis REAL-TIME CLEARING  Minimizes intra-day bilateral counterparty risk

 Leverage existing OTC infrastructure – one operational process

SIMPLICITY  Can clear through non-US Domiciled DCMs (in US)  No costly legal negotiations or significant technology build

4 Customer Margin Protection

 Hybrid of traditional Net and Gross margin models  Gross margin held at clearing house, NOT DCM

DCM’s Client Omnibus Account

Gross IM of  DCM Minimum Initial Margin (MIM) for all (2) clients $3MM is $3MM

DCM 2 DCM Buy-side A Positions Buy-side B Positions  Minimum IM: Buy-side A $2MM, Buy-side B $1MM Gross IM Gross IM  Buy-side positions partially offset - Net Margin is of $2MM of $1MM $750k, Custodial is $2.25MM

Buy-side A Buy-side B Buy-side  Gross margin is posted and segregated Net Net Custodial Custodial  Net margin is determined pro-rata by Gross IM $500K $1.5MM $250K $750K  Net margin at risk only in the event that another client at same DCM defaults and causes the DCM to default

5 The ICE Risk Waterfall Provides Multiple Layers of Protection

Layers of Protection Risk Management Waterfall

Ensure CP has sufficient financial Membership Criteria resources, operational capabilities and risk management experience 1. Defaulting Buy-side Margin (net & custodial) Collateralize potential Clearing Initial Margin Participant portfolio loss under Requirement 2. Defaulting CP House plausible distressed conditions Margin 3. Defaulting CP Guaranty Mark-To-Market Margin Adjust Clearing Participant Fund Requirement collateral through a daily debit/credit based on EOD MTM 4. Non-default clients of CP Intra-day Risk Monitoring Identify additional margin (net only) Special Margin Call requirements based on unusual market fluctuations 5. ICE Priority Guaranty Fund Execution (GF) Mutualize losses under extreme 6. Non-defaulting CPs GF / Guaranty Fund but plausible market scenarios ICE remaining GF 7. One Time Assessment on Oblige Clearing Participants to Limited One-Time CPs contribute a limited amount of Assessment additional default funding

6 Ease of Doing Business

ICE Supports the Existing OTC Model and Multiple Platforms

Trade Execution & Capture Affirmation & Clearing Consent Clearing & Confirmation

Voice or Trade Affirmation Platform DTCC e-trade Capture ICE

Executing Buy-side Affirms, DCM Affirms ICE Runs Risk Trade Trade Broker Alleges Allocates and and Routes to Filter Checks and Cleared & Routed to Block Trade Routes to DCM ICE Accepts Trade Confirmed TIW

No Changes to Trade Execution Multiple Affirmation Platforms Trades Cleared Intra-day on Near Real-Time Supported Basis Multiple Platforms Supported (ICE Link, Bloomberg, Tradeweb)

7 Buy-Side Steps to Clear CDS

To begin clearing CDS with ICE Trust, Buy-Side Customers need to:

 Establish relationships with one or more DCMs 1

 Sign ICE Standard Terms Annex, review ICE Rules and ICE DCM Annex

 Establish access to an authorized affirmation source and provide necessary authorizations to allow them to act on your behalf 2

1Bank of America/Merrill Lynch, Barclays, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, RBS and UBS 2Authorized affirmation sources include ICE Link, Bloomberg and Tradeweb

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