Baltic Exchange presses ahead with a plan for a central derivatives screen

City A.M. Reporter
THE Baltic Exchange is pressing ahead with launching a central screen as soon as it can to trade dry bulk freight derivatives despite broker worries over current proposals and a potential challenge from a separate platform.

In May the Baltic Exchange said it had applied for multilateral trading facility (MTF) status with the UK’s Financial Services Authority (FSA) for BaltEx which it expected would go live by the end of 2010, aiming to boost market activity.

But freight derivatives brokers, fearing a loss of commission business in this niche market, have objected to an FSA regulatory requirement which would take away the compulsory nomination of brokers in every trade. The FSA declined to comment.

“We are still working to get things ready as soon as we can,” said Baltic Exchange chief executive Jeremy Penn.

Freight forward agreements (FFAs), which allow a buyer to take a position on where freight rates will stand at a point in the future, are not traded on an exchange.

Dorian Benson, chairman of the FFABA, an association which represents the views of freight derivatives brokers, said its relationship with the Baltic Exchange and the FMIUG freight users’ body remained “very amicable” with all sides working to find a suitable product for traders and brokers.