Baltic Exchange and LCH.Clearnet In Tie-up Talks on Ship Futures Platform

Photo courtesy Baltic Exchange

LONDON, June 20 (Reuters) – London’s centuries-old Baltic Exchange and clearing house LCH.Clearnet are in talks about a tie-up over the Baltic’s dry bulk freight derivatives platform, the two groups said on Friday.

Baltex is the first central electronic marketplace for freight forward agreements (FFA), which enable investors to take positions on freight rates at a point in the future.

Volumes have remained low on the loss-making Baltex multilateral trading facility since it started in June 2011, however.

Discussions between the privately-held Baltic and LCH.Clearnet Ltd, a unit of the London Stock Exchange, involve enabling FFA trades to be cleared and reported via Baltex allowing for greater transparency amid calls for tougher regulatory scrutiny of global financial markets.

“We are finalising arrangements with LCH.Clearnet, which clears about 70 percent of the dry bulk FFA market, to enable them to transform OTC (over-the-counter) derivatives into futures in response to certain rule changes,” Baltic Chairman Quentin Soanes wrote in the exchange’s annual report published on Friday.

Its chief executive added this opportunity “has the potential to dramatically change the fortunes of Baltex”.

“LCH.Clearnet Ltd is in discussions with the Baltic Exchange regarding possible arrangements for the futurisation of OTC FFA derivatives in response to certain rule changes,” the clearing house said in a statement on Friday.

Sources told Reuters last year that the Baltic had received expressions of interest from exchanges and financial operators, including the London Metal Exchange, CME Group and LCH.Clearnet. (Reporting by Jonathan Saul; editing by Jason Neely)