Baltic Exchange Launches Dry Freight Derivative Marketplace

The Baltic Exchange’s new electronic marketplace for dry freight derivatives, Baltex, began trading today.

Baltex, which executed its first trade three minutes after screens went live at 7:30 a.m. London time, signed up several top players in the dry bulk shipping markets, including Cargill, Morgan Stanley, Toepfer, and shipping hedge fund M2M Management.

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Regulated by the UK’s Financial Services Authority, Baltex provides Forward Freight Agreement prices and on-line execution. It supports straight through processing to the international clearing houses, LCH in London and Oslo’s NOS, with Singapore’s SGX and the Chicago Mercantile Exchange expected to be added soon.

Baltex, which took three years to develop, faced resistance from some brokers who presently use phones to conduct up to 95 percent of trades in FFAs.

“The shipping, financial and commodity sectors now have a centralized, transparent and regulated marketplace in which dry freight derivatives can be traded,” said Baltic Exchange chairman Mark Johnson.

“ We expect Baltex to attract new companies in the coming months and support greater liquidity in the FFA market.”

The new screen-based trading system faces competition from Singapore’s Cleartrade Exchange, which went live June 2 pricing freight, iron ore, steel and fertilizer derivatives.

Dry freight derivatives trading totaled a little more than one billion tons in 2010, according to the Baltic Exchange.

Cargill is the biggest market participant accounting for some 200 million tons of trades.

-- Contact Bruce Barnard at brucebarndard47@hotmail.com.