Baltic Exchange announces activity weighted forward curve for Tanker FFAs

Markets — By on November 8, 2012 at 6:48 PM

The Baltic Exchange

Today, the Baltic Exchange announced the launch of an activity weighted forward curve for the tanker forward freight agreement (FFA) market.

Until today, forward curve calculations were based on an average of submissions given by Baltic Exchange panel brokers. The new forward curve takes into account the level of market activity each panel broker has undertaken over a specified period and this is reflected by weighting their submissions accordingly. This new method of calculation will deliver a forward curve that is more aligned with actual market activity and experience.

The curve will be adopted for mark-to-market valuations by all clearing houses engaged in the clearing of tanker freight derivatives.

Nils Arnesen, chairman of the Tanker FFABA (FFA brokers’ association) and senior broker at Marex Spectron said: “This is excellent news and a positive step for the market. It sends a clear message of cohesion and unification to the tanker market and reinforces the Baltic’s commitment to this important sector of the shipping industry.”

 Tanker derivatives have been trading since the mid 1990s but following the global financial crisis, an almost complete move to a fully cleared market has taken place. The Baltic’s forward curves are widely used for mark-to-market purposes and this development strengthens that position.

Susan Glover, chair of the FMIUG (tanker derivatives users’ group) commented: “I am very pleased that the consolidated forward curve requested by the market is now being delivered with the agreement and cooperation of the clearing houses. I believe this demonstrates unified support for this welcome initiative.”

The new activity weighted forward curve will be published from today.

Forward curves

A forward curve is the curve representing the prices at which the market is willing to transact future business today.

The Baltic Exchange

The Baltic Exchange is the world’s only independent source of maritime market information for the trading and settlement of physical and derivative contracts. Its international community of over 600 members encompasses the majority of world shipping interests and commits to a code of business conduct overseen by the Baltic.

Baltic Exchange members are responsible for a large proportion of all dry cargo and tanker fixtures as well as the sale and purchase of merchant vessels.

In June 2011 the Baltic launched Baltex, an FSA approved Multilateral Trading Facility for dry freight derivatives. Baltex brings the dry bulk FFA market to one central location, enabling traders, brokers, shipowners and charterers to trade electronically.

Baltic Exchange services

•         Independent, high quality dry, wet and gas freight market information
•         Self-regulated chartering, sale and purchase and freight derivatives markets
•         Central forum for competing freight market interests
•         Framework ensuring high standards of business practice and co-operation
•         London-based business facilities for members

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