Baltic Exchange Futures Platform Considering Move Into Commodities

By Jonathan Saul

LONDON, June 29 (Reuters) – London’s Baltic Exchange is learning a possible foray into commodities and is open to proposals on tie-ups as different exchanges try to spice up volumes, its chief government stated.

Baltex, the Baltic’s digital delivery platform, was launched in 2011 as the primary central digital market for freight ahead agreements (FFAs), which permit buyers to take positions on freight charges at a degree sooner or later.

Since the start of this 12 months, the beforehand loss making platform, has reached break even ranges after Baltex turned a venue for presenting block futures at first of December.

“We have looked at whether we can futurise some of the adjacent contracts – some of the contracts that fit well and which are traded broadly by the same people,” Baltic CEO Jeremy Penn instructed Reuters.

“Things like iron ore and some of the coal contracts … and to the extent that we could provide something useful in that area, then we would,” Penn stated, including there was no timeframe.

Transforming OTC (over-the-counter) derivatives into futures by way of a clearing home is named futurisation.

The privately held Baltic Exchange and LCH.Clearnet, majority owned by the London Stock Exchange, reached an settlement final 12 months permitting FFA trades to be cleared and reported by way of Baltex, designed to extend transparency in a interval of more durable international market regulatory scrutiny.

Baltex, run by a Baltic-owned unit, had beforehand come below hearth from brokers who most popular to commerce FFAs by cellphone or on their screens to maximise fee.

Sources instructed Reuters in July 2013 that the Baltic, the hub of the worldwide delivery market because it was based in 1744, had acquired expressions of curiosity in Baltex from exchanges and monetary operators together with the London Metal Exchange (LME), CME Group and LCH.Clearnet.

“We have always had a door, which is open to hear proposals from third parties. We have always been keen to see the FFA market develop,” Penn stated.

“On the other hand, the current structure and process seems to have served the market very well for an extended period of time. It is not obvious what wonderful new things can be provided. But, we would not rule anything out.”

Hong Kong Exchanges and Clearing purchased the LME for $2.2 billion in 2012. To justify that value the LME is performing to spice up income.

Penn stated: “It is no secret the LME have often felt that it (FFA market) was very much adjacent to their business.”

“Anybody can come along and say I am going to develop an FFA product,” he added. “And if they want to use the Baltic settlement mechanism, then they are going to have to come with a proposition which is of interest to the Baltic members and the Baltic market.”

The LME declined to remark when contacted. (Additional reporting by Pratima Desai; Editing by Veronica Brown and William Hardy)