New Baltic Exchange indices are arrived at by market consensus.
The Baltic consults with market users and brokers and a possible route and vessel specification is created which has suitable spot volume and transparency, and satisfies the criteria established in the Guide to Market Benchmarks (GMB) or the Guide of the respective market if applicable. It is also important that the possible route is not dominated by one or two players. Once a potential route is identified, there is further discussion with users.
The Baltic will then draw up a list of potential Panellists and assess their ability to provide rates. Once all is in place, the Baltic will finalise a recommendation for the Baltic Index Council (BIC) to commence Trial reporting.
The trial phases are as follows:
Blind trial: Only the Baltic has visibility of the final published rate; this allows the Baltic to assess all Panellists’ suitability.
Private trial: The Baltic and Panellists have visibility of the final rate; this allows the Baltic to receive feedback on how reflective of the physical market the index is and changes to route and/or vessel specifications may be made.
Public trial: The final published rate is now available on screen on My Baltic via the Baltic Exchange website (viewable by all Baltic data subscribers). It is not downloadable. Feedback is encouraged from market users to help refine the index and ensure its trustworthiness, reliability and robustness. Once the Baltic is satisfied all index criteria have been met, an application is made to the Baltic Index Council (BIC) to go Live.
Live: Once approved by BIC, live reporting commences. The published rate is available and downloadable for all Baltic data subscribers.
Each trial period usually lasts between one and three months.
It is key to note that throughout the trial phases, the Baltic can easily and quickly react to market feedback to amend/adjust any criteria, such as laycan, cargo size, commission, duration etc., or even a load/discharge port. Once the index is live, no change can be made to the index without a fully documented market consultation asking users to agree or disagree with proposed changes. There are then fresh trial periods, and potentially later, dual-reporting for a period of time, if changes are implemented.