FMC to Study Rate Indexes, Derivatives

The Federal Maritime Commission wants to learn more about the nascent container freight index and derivatives markets. Chairman Richard A. Lidinsky Jr.The Federal Maritime Commission wants to learn more about the nascent container freight index and derivatives markets. Chairman Richard L. Lidinsky Jr. on Thursday appointed a staff working group to analyze the new financial tools carriers or shippers can use to hedge against future changes in contract rates.

Lidinsky said index-based rates and derivatives could be useful in managing rate risk. While participants in the new market need flexibility, he said, “I want to explore whether modest, commonsense standards are needed to ensure participants have adequate information and avoid manipulation.”

The FMC working group will look at how well index rates conform with the requirements of the Shipping Act on service contracts, if indexes cited are beyond the control of parties in a service contract, the effect of the Dodd-Frank consumer protection law on index swaps, and the overall transparency in the indexing process.

The staff is scheduled to report its findings at the next commission meeting on June 8.

-- Contact R.G. Edmonson at bedmonson@joc.com.