What is an FFA?

What is an FFA?


Forward Freight Agreements (FFAs) are primarily transacted on a cleared basis and will normally be based on the terms and conditions of the FFABA standard contracts as adapted by the various clearing houses.

The main terms of an agreement cover:

(a) The agreed route.
(b) The day, month and year of
(c) Contract size.
(d) The contract rate at which
     differences will be settled.

Commissions are agreed between principal and broker. The broker, acting as intermediary only, is not responsible for the performance of the contract.


The basics

Freight derivatives 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 a relevant route assessment, usually one published by the Baltic Exchange.


Cleared contracts

Cleared contracts are margined on a daily basis through the designated clearing houses and margins are based on a close-of-play forward assessment published by the Baltic Exchange. At the end of each day, traders pay or receive the difference between the price of the paper contract and the market index.

Clearing services are provided by the London Clearing House (LCH), NASDAQ OMX Commodities (NDAQ), the Singapore Exchange (SGX) and the Chicago Mercantile Exchange (CME).

Baltic Exchange Ltd., St Mary Axe, London, EC3A 8BH
Registered in England Number 64795
Tel + 44 (0) 20 7283 9300, Fax + 44 (0) 20 7369 1622.
Calls to Baltic Exchange staff are recorded
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