ICE CLEAR CREDIT CREDIT EVENT PROCESSING - REPUBLIC OF UKRAINE

Transcription

1 ICE CLEAR CREDIT CREDIT EVENT PROCESSING - REPUBLIC OF UKRAINE OCTOBER,

2 INDEX CREDIT EVENT SETTLEMENT: CDX.EM SERIES The ISDA EMEA Determinations Committee (DC) has resolved that a Failure to Pay Credit Event in relation to the Republic of Ukraine has occurred: Event Determination Date (EDD) = Monday October 5 Auction Date = Tuesday October 6 Auction Settlement Date = Tuesday October 13 The below table lists the cleared indices impacted, the new index versions, index factors and REDIDs: INDEX TEN OR UKRAINE S INDEX CONSTITUENT % OLD VERSION / INDEX FACTOR OLD REDID NEW VERSION / INDEX FACTOR NEW REDID CDX.EM.14 5Y / I65BZBF8 3 / I65BZBZ4 CDX.EM.15 5Y / I65BZBG6 3 / I65BZCA8 CDX.EM.16 5Y / I65BZBH4 3 / I65BZCB6 CDX.EM.17 5Y / I65BZBI2 3 / I65BZCC4 CDX.EM.18 5Y / I65BZBJ0 3 / I65BZCD2 CDX.EM.19 5Y / I65BZBK7 3 / I65BZCE0 CDX.EM.20 5Y / I65BZBL5 3 / I65BZCF7 CDX.EM.21 5Y / I65BZBM3 3 / I65BZCG5 CDX.EM.22 5Y / 1 2I65BZBN1 2 / I65BZCH3 CDX.EM.23 5Y / 1 2I65BZBO9 2 / I65BZCI1 CDX.EM.24 5Y / 1 2I65BZBP6 2 / I65BZCJ9 INTERCONTINENTAL EXCHANGE 2

3 CREDIT EVENT PROCESSING STEPS DATE TUES OCT 6 (A) WED OCT 7 (A+1) PROCESSING STEPS ISDA Auction held to determine the auction settlement price for Republic of Ukraine. Last day to clear the old index versions. Accrued coupon continues to be included in the Mark-to-Market Margin (MTMM) from Auction Date to the day prior to Auction Settlement Date. New CDX.EM S14-24 index versions clearing eligible. ICE starts collecting EOD prices in the new index versions. ICE stops collecting EOD prices in the old index versions. ICE will establish an end-of-day valuation for the old CDX.EM positions. THURS OCT 8 (A+2) FRI OCT 9 (A+3) MON OCT 12 (U.S. Columbus Day Holiday) TUES OCT 13 (A+4) End-of-day Client netting will not run due to the conclusion of the weekly clearing cycle. Credit Event Settlement and Credit Event Coupon amounts appear on the ICE Clear Participant Trade Payment Report. Positions in the old index versions will roll to the new index versions after end-of-day. If a Client account is Net and has positions in both the old and new CDX.EM versions, both net positions will be terminated. A new position with a notional amount reflecting only the sum of those two positions is created in the new version of the CDX.EM indices. The adjustment used to derive the prices of the old version of the index will be removed. The credit event adjustment is removed to prevent the seller of protection from continuing to post mark-to-market margin the for the credit event after the credit event settles. End-of-day Client Netting will not run due to the U.S. Columbus Day Holiday. Auction Settlement Date: Credit Event Payments settle via the clearinghouse margin settlement process. End-of-day Client Netting will not run due to the credit event processing. Clearing reports will only contain the new CDX.EM S14-24 versions. INTERCONTINENTAL EXCHANGE 3

4 EOD VALUATIONS FOR OLD VS NEW INDEX VERSIONS Upon completion of a successful Auction (A), there is a settlement period that the clearinghouse continues to guarantee positions in the Old Version of the index in addition to clearing the new version of the index. During this period, the clearinghouse will establish an end-of-day valuation for both the old and the new versions of the index instrument. On A+1, ICE begins to collect prices in the new version of the index. ICE no longer collects prices in the old version of the index. The prices used for the old version of the index are derived from the prices of the new version of the index and the recovery rate determined for the Single Name on Auction Date. On the day prior to auction settlement (A+3 in the case of Republic of Ukraine), the adjustment used to derive the prices of the old version of the index will be removed. The credit event adjustment is removed to prevent the seller of protection from continuing to post mark to market margin for the credit event after the credit event settles. INTERCONTINENTAL EXCHANGE 4

5 CREDIT EVENT PAYMENT CALCULATIONS Two Credit Event Payments will be calculated and settled for each CDX.EM position based upon the Republic of Ukraine s constituent percentage: Credit Event Coupon (BUY) = (Fixed Rate/100*Notional*Accrual*Constituent%)*-1 Credit Event Coupon (SELL) = Fixed Rate/100*Notional*Accrual*Constituent% Credit Event Settlement (BUY) = Notional*(1-Recovery%)*Constituent% Credit Event Settlement (SELL) = (Notional*(1-Recovery%)*Constituent%)*-1 For example, 10MM position in CDX.EM.24: Ukraine Recovery Rate = % Auction Date = 6-Oct-15 Ukraine Constituent of CDX.EM.24 = 0.02 Last Coupon Payment Date = 21-Sep-15 CDX.EM.24 Fixed Rate = 1 Coupon Accrual Days = 15 Event Determination Date = 5-Oct-15 Accrual (Accrual Days/360) = Client is 10MM Buyer, Pays CE Coupon, Receives CE Settlement CE Coupon (BUY)* = (1/100*10,000,000* *0.02)*-1 = ($83.33) CE Settlement (BUY)* = 10,000,000*( %)*0.02 = $38, Client is 10MM Seller, Receives CE Coupon, Pays CE Settlement CE Coupon (SELL)* = 1/100*10,000,000* *0.02 = $83.33 CE Settlement (SELL)* = (10,000,000*( %)*0.02)*-1 = ($38,750.00) *All calculations are rounded to two decimal places INTERCONTINENTAL EXCHANGE 5