FREIGHT DERIVATIVES MARKET COLLABORATES TO ENSURE GROWTH
Freight derivative trading members of the Baltic Exchange signed an agreement today (Tuesday 28 January) to boost confidence in the growing freight derivatives market. The agreement formalises existing arrangements between brokers and principals and includes an undertaking to ensure the continued integrity of the Baltic's daily indices and route assessments.
Speaking at the signing of the agreement between the Baltic Exchange, its Freight Market Information Users Group (FMIUG) and Forward Freight Agreement Brokers' Association (FFABA), the chairman of the Baltic Exchange's Freight Indices and Futures Committee (FIFC) Michael McClure said:
"To have a successful freight derivatives market, the industry needs to demonstrate its continuing confidence in the Baltic route assessments and to work together to help grow this market. The continued growth of freight derivatives attests to the fact that market participants believe that the Baltic's market assessments are completely robust. We encourage prospective new players to join this growing and ever important risk management market."
He added:
" I hope that this agreement will help to demonstrate how closely brokers and principals are working together to discuss issues such as the changes to the indices and the development of a standard contract."
FMIUG chairman Pierre Aury welcomed the agreement commenting:
"Over the last decade the FFA industry has had a successful track record of steady growth. By formalising the way in which we work together through the Baltic Exchange, we hope to increase further the liquidity of the market."
FFABA chairman Philippe van den Abeele added:
"The freight derivatives market has gone from strength to strength and this agreement will help ensure its continuing success."
ENDS
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Joint statement
The Baltic Exchange, the Freight Market Information Users Group (FMIUG) and the Forward Freight Agreement Brokers' Association (FFABA) hereby state that they support the following joint objectives:
- To increase the liquidity of the freight derivatives market
- To encourage membership of the Baltic Exchange.
- To increase awareness of, and confidence in, the reliability and robustness of Baltic Exchange freight market information.
These are to be achieved by:
- Maintaining the integrity and consistency of the daily indices and route assessments by close adherence to the Manual for Panellists by the reporting panellists.
- Maintaining as close as possible a correlation between the route assessments and the physical/cash markets. The widest possible industry participation in this process will continue to be encouraged through the Freight Market and Consultative Group (FMFCG).
- Permanent production and dissemination of freight market information (via balticexchange.com and the news vendors) by the Baltic Exchange.
- Endeavouring to ensure the creditworthiness of market participants. · Best price dissemination by FFABA brokers in line with accepted market practices.
- Worldwide marketing of Baltic freight market information and the benefits of membership of the Exchange by the FMIUG, FFABA and the Exchange itself.
- The development and use of one standard contract, updated according to the latest developments in the market, by close cooperation between the principals and the FFABA.
FREIGHT DERIVATIVES MARKET COLLABORATES TO ENSURE GROWTH
Freight derivative trading members of the Baltic Exchange signed an agreement today (Tuesday 28 January) to boost confidence in the growing freight derivatives market. The agreement formalises existing arrangements between brokers and principals and includes an undertaking to ensure the continued integrity of the Baltic's daily indices and route assessments.
Speaking at the signing of the agreement between the Baltic Exchange, its Freight Market Information Users Group (FMIUG) and Forward Freight Agreement Brokers' Association (FFABA), the chairman of the Baltic Exchange's Freight Indices and Futures Committee (FIFC) Michael McClure said:
"To have a successful freight derivatives market, the industry needs to demonstrate its continuing confidence in the Baltic route assessments and to work together to help grow this market. The continued growth of freight derivatives attests to the fact that market participants believe that the Baltic's market assessments are completely robust. We encourage prospective new players to join this growing and ever important risk management market."
He added:
" I hope that this agreement will help to demonstrate how closely brokers and principals are working together to discuss issues such as the changes to the indices and the development of a standard contract."
FMIUG chairman Pierre Aury welcomed the agreement commenting:
"Over the last decade the FFA industry has had a successful track record of steady growth. By formalising the way in which we work together through the Baltic Exchange, we hope to increase further the liquidity of the market."
FFABA chairman Philippe van den Abeele added:
"The freight derivatives market has gone from strength to strength and this agreement will help ensure its continuing success."
ENDS
For further information, please contact:
Bill Lines
Tel: 020 7369 1653
E -mail: blines@balticexchange.com
Joint statement
The Baltic Exchange, the Freight Market Information Users Group (FMIUG) and the Forward Freight Agreement Brokers' Association (FFABA) hereby state that they support the following joint objectives:
- To increase the liquidity of the freight derivatives market
- To encourage membership of the Baltic Exchange.
- To increase awareness of, and confidence in, the reliability and robustness of Baltic Exchange freight market information.
These are to be achieved by:
- Maintaining the integrity and consistency of the daily indices and route assessments by close adherence to the Manual for Panellists by the reporting panellists.
- Maintaining as close as possible a correlation between the route assessments and the physical/cash markets. The widest possible industry participation in this process will continue to be encouraged through the Freight Market and Consultative Group (FMFCG).
- Permanent production and dissemination of freight market information (via balticexchange.com and the news vendors) by the Baltic Exchange.
- Endeavouring to ensure the creditworthiness of market participants. · Best price dissemination by FFABA brokers in line with accepted market practices.
- Worldwide marketing of Baltic freight market information and the benefits of membership of the Exchange by the FMIUG, FFABA and the Exchange itself.
- The development and use of one standard contract, updated according to the latest developments in the market, by close cooperation between the principals and the FFABA.
Note to editors
FFAs provide a means of hedging exposure to freight market risk through the trading of specified time charter and voyage rates for forward positions. Settlement is effected against the relevant route assessment.
The volume of trade in FFAs has grown steadily in recent years and has an estimated annual value of some £2.5 billion.
The Freight Market and Futures Consultative Group (FMFCG) is open to all members of the Baltic Exchange including:
- Reporting panellists
- Charterers
- Owners
- Freight futures traders
- FFA brokers
- Energy companies
- Financial institutions
- Exchanges
The group provides both the users and producers of the Baltic's freight market information with a clearer line of communication to the Exchange and ensures that the Exchange's assessments of the wet and dry spot markets continue to be the best available.
The FFABA has 15 member companies and was established in 1997. It operates within the framework of the Baltic Exchange. It is currently chaired by Philippe van den Abeele of Clarksons Securities.
The FIFC consists of five Baltic Exchange directors who oversee the wide range of Baltic freight market information. It is currently chaired by Michael McClure of Navios Corporation.
The FMIUG consists of principals who use Baltic freight market information. It is currently chaired by Pierre Aury of AEP Energy Services.
The Baltic Exchange is the world's only self-regulated shipping market maintaining professional standards, resolving disputes and providing market information. It is the world's largest shipbroking market and its members handle some 30 per cent of all dry cargo fixtures and 50 per cent of crude oil fixtures. More than half the world's new and second hand tonnage is bought and sold by Baltic members in a market which, according to Clarkson's Research, was worth around US$ 34 billion in 2001.
