FAQ

1. What is the Baltic Exchange?
2. When was it established?
3. Who are its members?
4. What is its constitution?
5. Who owns shares in the company?
6. Are shares in the company traded on the Stock Exchange?
7. What is the Baltic Code?
8. Who are the principal officers of the Baltic Exchange?
9. How many people does the Baltic Exchange employ?
10. What does the Baltic Exchange do?
11. What are the Baltic indices?
12. How are they used?
13. Does trading still take place on the trading Floor?
14. What is the role of shipbrokers?
15. How important is the maritime services sector to the British economy?
16. What was the Baltic Exchange's financial performance in its latest trading year?
17. Who supervises the activities of the Baltic Exchange and its members?
18. Are there different categories of membership?
19. Can anyone become a member of the Baltic Exchange?
20. Can trade associations become members of the Exchange?
21. What is a Forward Freight Agreement?
22. What role does the Baltic's Freight Indices and Futures Committee fulfill?

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1. What is the Baltic Exchange?

   The Baltic Exchange is the world's only independent source of maritime market information for the trading and settlement of physical and derivative contracts. Its international community of over 550 members encompasses the majority of world shipping interests and commits to a code of business conduct overseen by the Baltic.

   Baltic Exchange members are engaged in arranging the ocean transportation of bulk cargoes such as oil, coal, grain and iron ore on behalf of shipowners and charterers; trading freight derivatives and buying and selling merchant vessels.

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2. When was it established?

   The Exchange traces its origins back several centuries with the first use of the name at the Virginia and Baltick Coffee House in Threadneedle Street in 1744, reflecting the particular trading interests of the merchants and ships' captains who frequented the premises and negotiated terms for the shipment of cargoes.

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3. Who are its members?

   Members are drawn from across the international bulk shipping industry and are mainly shipbrokers, freight derivative brokers, trading houses, shipowners and cargo interests. The Baltic also embraces those professions and organisations whose activities are closely related to the maritime world. They include: maritime lawyers and arbitrators, insurers, ship registries, financiers, ship classification societies as well as air charterers.

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4. What is its constitution?

   The Baltic Exchange has evolved over two and a half centuries. It was most recently registered as a private limited company with shares in 1900.

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5. Who owns shares in the company?

   The Baltic Exchange is owned by its members. Shares with a nominal value of 50 pence were issued at the time of its incorporation and may be owned only by member companies and certain nominated representatives employed by companies.

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6. Are shares in the company traded on the Stock Exchange?

   No. Shares may be owned only by member companies and certain nominated representatives. These shares are traded directly between members and registered at the Baltic Exchange.

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7. What is the Baltic Code?

   The Baltic Code is the ethical foundation of the Exchange. On election to membership, all members undertake to observe the provisions of the code. The Baltic Code is enshrined in the Baltic's famous motto "Our Word Our Bond". Through its code of business practice, the Baltic Exchange ensures that best market practice is observed. Members who have had unsatisfactory dealings with each other, or with non-members are able to call upon the Baltic's dispute resolution service, which typically recovers $1-2 million for members annually.
   
   Click here for full details.

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8. Who are the principal officers of the Baltic Exchange?

   Shareholders and certain nominated representatives of companies of the Exchange elect representatives to serve as directors of the Baltic and the board elects its chairman and deputy chairman each of whom normally serves a two year term of office. The current chairman is Mark Jackson and the vice chairman is Paul Over. Jeremy Penn, the chief executive, is appointed by the board. The company secretary is Duncan Bain.

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9. How many people does the Baltic Exchange employ?

   The Baltic Exchange employ 20 staff members.

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10. What does the Baltic Exchange do?

    The Exchange regulates its members' activities as shipbrokers, collates and distributes a range of unique freight market information, resolves disputes, speaks on behalf of the market and provides business facilities for its members.

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11. What are the Baltic indices?

    The Baltic indices are an assessment of the price of moving the major raw materials by sea. The indices are based on assessments of the cost of transporting various bulk cargoes, both wet (eg crude oil and oil products) and dry (eg coal and iron ore), made by leading shipbroking houses located around the world on a per tonne and daily hire basis. The information is collated and published by the Baltic Exchange. The Baltic is the only source of independent and quality freight market data and information. The principal indices are: the Baltic Exchange Capesize Index (BCI); Baltic Exchange Panamax Index (BPI);  the Baltic Exchange Supramax Index (BSI); and the Baltic Exchange Handysize index (BHSI). The Baltic Exchange Dry Index (BDI) is calculated by taking the timecharter components of the Baltic’s capesize, panamax, supramax and handysize indices. The Baltic Exchange International Tanker Routes (BITR) reports on 19 international oil routes and makes up the Baltic Exchange Dirty Tanker Index (BDTI) and the Baltic Exchange Clean Tanker Index (BCTI). The Exchange also publishes a daily fixture list, an LPG route assessment, the Baltic Exchange Sale & Purchase Assessment (BSPA), forward curves (Baltic Exchange Forward Assessment) and Forward Freight Agreement (FFA) settlement prices.

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12. How are they used?

    The indices are of crucial importance to the freight derivatives industry. They are also closely followed by charterers and shipowners. Some physical contracts - charterparties - are concluded on the basis of floating rates determined by the Baltic indices or route assessments.

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13. Does trading still take place on the trading Floor?

    The trading Floor was used by members on Monday lunchtimes over the past decade, and years ago hundreds of brokers came to the Baltic Exchange each day. More recently few fixtures - of ships and their cargoes - were concluded on the trading Floor since most negotiation took place from brokers' offices using the telephone and fax. Today a visit to the Baltic Exchange is usually for social reasons or to use its business facilities.

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14. What is the role of shipbrokers?

    Shipbrokers act on behalf of shipowners and cargo owners matching available vessels with available cargoes. They also buy and sell ships and are the source of detailed market intelligence. Shipbrokers also advise principals on risk management tools such as Forward Freight Agreements.

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15. How important is the maritime services sector to the British economy?

    A recent study by International Financial Services, London estimated that the maritime services sector - employing almost 14,000 people - generated over £1.3 billion in overseas earnings with Baltic Exchange members contributing an estimated £551 million to the UK economy in 2004.

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16. What was the Baltic Exchange's financial performance in its latest trading year?

    Click here to download the annual report and accounts.

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17. Who supervises the activities of the Baltic Exchange and its members?

    The Board of directors is elected by the members of the Baltic and is responsible for the development of policy and ensuring the effectiveness of its self-regulatory regime.

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18. Are there different categories of membership?

    There are two main categories of membership - full membership and social membership. Members are required to adhere to the Baltic Code. All applications for membership are considered by the Baltic Exchange Membership Committee.

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19. Can anyone become a member of the Baltic Exchange?

    Membership of the Exchange is open to anyone involved in shipping and its associated business provided they meet the entrance requirements.
    Social membership is open to individuals or companies wishing to enjoy discounted use of the Exchange's dining and meeting facilities.

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20. Can trade associations become members of the Exchange?

    Yes. There are currently 31 trade associations in membership. They include for example BIMCO, the Baltic Air Charter Association, Association of Average Adjusters and the Hong Kong Shipowners Association.

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21. What is a Forward Freight Agreement?

    Forward Freight Agreements (FFAs) offer shipowners and operators, charterers and traders a means of protecting themselves against the volatility of freight rates. Broadly defined, it is taking a position in a futures (paper) market as a substitute for a forward cash (physical) transaction.

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22. What role does the Baltic's Freight Indices and Futures Committee fulfill?

    The Freight Indices and Futures Committee (FIFC) is responsible for appointing panellists, determining index and route composition, and supervising all aspects of quality control. It liaises with industry users through the Freight Market & Futures Consultative Group (FMFCG) which in turn has input from the Freight Market & Indices Users Group (FMIUG) and the Forward Freight Agreement Brokers Association (FFABA), as well as other Baltic members.
    The FIFC is open and accountable and is responsible to the Board of the Baltic Exchange.

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