Baltic commits to ship futures screen despite slump

LONDON (Reuters): The Baltic Exchange remains committed to its money-losing central electronic trading platform for dry freight derivatives, confident that it will grow despite a shipping market slump, exchange officials said on Thursday.

In June 2011, it began providing the first central marketplace for freight forward agreements (FFAs), which allow a buyer to take a position on freight rates at a point in the future.

Trading volumes have remained low on Baltex, a multilateral trading facility run by a subsidiary.

“We remain optimistic that Baltex will be successful and is an opportunity to serve our members well while potentially creating substantial shareholder value over time,” Mark Jackson, the outgoing chairman said ahead of the member-owned exchange’s annual general meeting on Thursday.

FFA brokers, fearing a loss of commission business, had held up Baltex by objecting to a UK regulatory requirement that would take away fees that brokers had received on every trade. They still do not welcome it.

“Convincing the FFA broking members that this project is not damaging for their businesses continues to be a challenge, and we have worked hard both in routine communication and by modifications to the price discount structure to convince them,” Jackson said separately in the exchange’s annual report.

“The main obstacle to success is the need to change the everyday working habits of traders, and this inevitably takes time.”