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Thursday, July 30, 2009

Baltic Exchange Traders Asked About Freight Derivatives Market

Thursday, 30 July 2009

Baltic Exchange members are being asked if they want a central trading platform for the $155 billion freight-derivatives industry to preempt the risk of increased regulation. Trader members of the 265-year-old London-based shipping bourse were sent a six-question referendum by the Freight Market Information Users Group about the exchange’s role in the freight-derivatives market on July 27, Stefan Albertijn, chairman of the group, said by phone yesterday. Their response will be published Aug. 18. The group, part of the exchange that represents trader members, is concerned forward freight agreements -- contracts bought and sold to bet on future shipping costs -- may come under increased regulatory scrutiny from the U.S. Commodity Futures Trading Commission, Albertijn said.
“We want to be sure we can continue trading FFAs if regulations change,” he said. The group needs to give the Baltic Exchange a “clear mandate” for what traders want, he said.
The first question in the survey is whether traders want the Baltic Exchange to create a freight-derivatives “market place” that complies with “all current and future regulations,” Albertijn said.
Such a move might require the Baltic Exchange, owned by its members and with sales of 5 million pounds ($8.2 million) last year, to spend more on compliance and technology. The London Metal Exchange, seven times bigger by revenue, is proposing a derivatives exchange within a year.
The Baltic Exchange is the world’s only dedicated shipping- rates provider and its daily assessments are used to settle almost all freight-derivatives contracts. Most such transactions are conducted between two traders with payment guaranteed by clearinghouses.
Albertijn is also senior freight manager at Hamburg-based commodity company Alfred C. Toepfer International.

Source: Alaric Nightingale , Bloomberg