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.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."The dry freight shipping sector, meanwhile, has been battling with a surplus of ships ordered when times were good and with economic turmoil, which has battered earnings and taken its toll on ship owners, leading to some bankruptcies.
The exchange declined to provide data on Baltex volumes. Underlying weekly dry FFA volumes averaged 17,933 lots in the year to date, versus 19,887 lots in 2011 and down from 41,888 lots on average in 2008 before economic turmoil took its toll, exchange data showed.
"We are trying to build a platform for a long-term business," a Baltic spokesman said.The Baltic Exchange said that, despite the tough conditions, Baltex membership had grown from eight to 33 principle members.
Principals that have joined include trading houses, mining groups and banks such as ADM, Alfred C Toepfer, Barclays Capital, BHP Billiton, Bunge, Cargill International, Citigroup Global Markets, Glencore International, Louis Dreyfus, Macquarie Bank, Merrill Lynch, Morgan Stanley, Noble Chartering, Trafigura, UBS and Vitol.
The Baltic had previous said FFA brokers that signed up were Clarkson Securities Ltd, SSY Futures, FIS and Spectron Energy Services. It declined to give further details on Thursday.
"A number of major market players show and execute significant business on Baltex, but some have been less committed than we had expected," Baltic Exchange Chief Executive Jeremy Penn said in the annual report. "We are working to remedy this by continuously encouraging usage, maintaining regular dialogue with traders and their management."
Baltex generated income of 57,015 pounds ($88,500) in the financial year to end-March and had direct costs of 761,181 pounds, giving rise to a loss of 704,166 pounds, the Exchange said.Even though Baltex added to the group's costs, the exchange overall recorded a rise in pretax profit to 1.6 million pounds from 1.3 million in 2011, driven by its provision of global shipping market data and rates.
Source: Reuters
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."The dry freight shipping sector, meanwhile, has been battling with a surplus of ships ordered when times were good and with economic turmoil, which has battered earnings and taken its toll on ship owners, leading to some bankruptcies.
The exchange declined to provide data on Baltex volumes. Underlying weekly dry FFA volumes averaged 17,933 lots in the year to date, versus 19,887 lots in 2011 and down from 41,888 lots on average in 2008 before economic turmoil took its toll, exchange data showed.
"We are trying to build a platform for a long-term business," a Baltic spokesman said.The Baltic Exchange said that, despite the tough conditions, Baltex membership had grown from eight to 33 principle members.
Principals that have joined include trading houses, mining groups and banks such as ADM, Alfred C Toepfer, Barclays Capital, BHP Billiton, Bunge, Cargill International, Citigroup Global Markets, Glencore International, Louis Dreyfus, Macquarie Bank, Merrill Lynch, Morgan Stanley, Noble Chartering, Trafigura, UBS and Vitol.
The Baltic had previous said FFA brokers that signed up were Clarkson Securities Ltd, SSY Futures, FIS and Spectron Energy Services. It declined to give further details on Thursday.
"A number of major market players show and execute significant business on Baltex, but some have been less committed than we had expected," Baltic Exchange Chief Executive Jeremy Penn said in the annual report. "We are working to remedy this by continuously encouraging usage, maintaining regular dialogue with traders and their management."
Baltex generated income of 57,015 pounds ($88,500) in the financial year to end-March and had direct costs of 761,181 pounds, giving rise to a loss of 704,166 pounds, the Exchange said.Even though Baltex added to the group's costs, the exchange overall recorded a rise in pretax profit to 1.6 million pounds from 1.3 million in 2011, driven by its provision of global shipping market data and rates.
Source: Reuters
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