Some frequently asked questions about the Baltic Exchange and its services
When was it established?
The Baltic Exchange traces its origins back several centuries with the first use of the name at the Virginia and Baltick Coffee House in Threadneedle Street in 1744, reflecting the particular trading interests of the merchants and ships' captains who frequented the premises and negotiated terms for the shipment of cargoes.
Who are its members?
Members are drawn from across the international bulk shipping industry and are mainly shipbrokers, freight derivative brokers, trading houses, shipowners and cargo interests such as oil majors, grain houses and iron ore miners. The Baltic also embraces those professions and organisations whose activities are closely related to the maritime world. They include: maritime lawyers and arbitrators, insurers, ship registries, financiers, ship classification societies as well as air charterers.
How do the licencing arrangements for the use of Baltic Exchange data work?
The Baltic Exchange publishes daily assessments for the dry bulk and tanker freight markets which are widely used by shipowners, traders and charterers. On occasion Baltic data is referenced inside contracts. When used in this way, counterparties are required to have a valid Baltic Data licence for the entire duration of the contract. This includes, but is not limited to, Time and Voyage Charterparties, Contracts of Affreightment and FFA agreements that are not given up for clearing. Both counterparties are required to have a valid Baltic Data licence.
Baltic Data is based on assessments made by Panellist Brokers. One of the ways to obtain a Baltic Data licence is to nominate a Baltic Panellist Broker in the contract.
The Baltic Exchange’s subsidiary, Baltic Exchange Information Services Ltd (BEISL), is authorised by the UK’s Financial Conduct Authority (FCA) as a benchmark administrator under EU Benchmark Regulation. This means that the Baltic Exchange’s daily dry bulk, tanker and gas freight indices are regulated by an EU National Competent Authority.
What does the Baltic Exchange do?
We are a regulated benchmark provider of assessments for the dry bulk, tanker, gas and container markets. Through the Baltic Code, the Baltic Exchange provides members with a framework to support their shipbroking and chartering activities. We support our members by helping to resolve disputes, provide training and escrow services. We speak on behalf of the shipping market and provide London business facilities for members.
What are the Baltic indices?
The Baltic indices are based on assessments of the cost of transporting various bulk cargoes, both wet (eg crude oil and oil products),dry (eg coal and iron ore), gas (LNG and LPG) made by leading shipbroking houses located around the world on a per tonne and daily hire basis. The information is collated and published by the Baltic Exchange. We also provide daily container market assessments in collaboration with Freightos as well as assessments on vessel operating costs, Sale & Purchase and vessel recycling prices.
The principal dry cargo indices are: the Baltic Exchange Capesize Index (BCI); Baltic Exchange Panamax Index (BPI); the Baltic Exchange Supramax Index (BSI); and the Baltic Exchange Handysize index (BHSI). The Baltic Exchange Dry Index (BDI) is calculated by taking the timecharter components of the Baltic’s capesize, panamax and supramax indices.
The Baltic Exchange International Tanker Routes (BITR) reports on international oil routes and makes up the Baltic Exchange Dirty Tanker Index (BDTI) and the Baltic Exchange Clean Tanker Index (BCTI).
We cover the gas markets through our LNG (BLNG) and LPG (BLPG) assessments.
Shipping investors are able to assess the health of vessel earnings through our quarterly operating expenses assessments, as well as our weekly Sale & Purchase and Recycling assessments.
Forward curves for all listed freight contracts are also published on a daily basis.
In 2020 we partnered with TAC Index to provide assessments for the air cargo market.
How are the indices used?
The indices are of crucial importance to the freight derivatives industry. They are also closely followed by charterers and shipowners. Some physical contracts - charterparties - are concluded on the basis of floating rates determined by the Baltic indices or route assessments.
What is the role of shipbrokers?
Shipbrokers act on behalf of shipowners and cargo owners matching available vessels with available cargoes. They also buy and sell ships and are the source of detailed market intelligence. Shipbrokers also advise principals on risk management tools such as Forward Freight Agreements.
Who are the panellists?
The members of the various Baltic Exchange panels are competitive shipbrokers who do not invest in the markets they report and are free from conflicts of interest. Shipowners or charterers cannot be panellists.
Strict criteria apply to the selection of Baltic Exchange panellists. These include:
Recognition as competent, professional firms, actively engaged in the markets they report, with adequate personnel
Membership of the Baltic Exchange, meeting all relevant membership criteria
Geographical spread of panellists
Exclusion of firms who are exclusive representatives of principals or dependent on small number of clients
Panellists are able to provide counterparts with a settlement licence to cover their use of Baltic Data within the same market sector. See here for a list of Baltic panellists.
Who supervises the activities of the Baltic Exchange and its members?
The Baltic Exchange Council (BEC) is the governing body which oversees the Baltic, including the Membership Committee and the Charities Committee, in relation to its strategy for membership services, social responsibility, charities and its relationship with its members, governments, regulatory bodies and the global shipping community. Members of Baltic nominate from among themselves eight representatives on the BEC who are vetted by the incumbent BEC and approved by Baltic (the Member Representatives). The Chairman of the Baltic Index Council, the Chief Executive Officer of Baltic and two directors of the Baltic Board will also be members of the BEC. The BEC elects its Chairman and Vice Chairman from among its Member Representatives. The Chairman of the BEC is invited to attend meetings of the Baltic Board where required.
Are there different categories of membership?
There is only one category of membership. Members are required to adhere to the Baltic Code. All applications for membership are considered by the Baltic Exchange Membership Committee.
Can anyone become a member of the Baltic Exchange?
Membership of the Baltic is open to anyone involved in shipping and its associated business provided they meet the entrance requirements. Social membership is open to individuals or companies wishing to enjoy discounted use of the Exchange's dining and meeting facilities.
Can trade associations become members of the Exchange?
Yes. Member trade associations include for example BIMCO, the Air Charter Association, Association of Average Adjusters and the Hong Kong Shipowners Association.
What is a Forward Freight Agreement?
Forward Freight Agreements (FFAs) offer shipowners and operators, charterers and traders a means of protecting themselves against the volatility of freight rates. Broadly defined, it is taking a position in a futures (paper) market as a substitute for a forward cash (physical) transaction.