Baltic Exchange announces activity weighted forward curve for tanker FFAs

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Today, the Baltic Exchange announced the launch of an activity weighted forward curve for the tanker forward freight agreement (FFA) market.

Until today, forward curve calculations were based on an average of submissions given by Baltic Exchange panel brokers. The new forward curve takes into account the level of market activity each panel broker has undertaken over a specified period and this is reflected by weighting their submissions accordingly. This new method of calculation will deliver a forward curve that is more aligned with actual market activity and experience.

The curve will be adopted for mark-to-market valuations by all clearing houses engaged in the clearing of tanker freight derivatives.  

Nils Arnesen, chairman of the Tanker FFABA (FFA brokers’ association) and senior broker at Marex Spectron said: “This is excellent news and a positive step for the market. It sends a clear message of cohesion and unification to the tanker market and reinforces the Baltic’s commitment to this important sector of the shipping industry.”

Tanker derivatives have been trading since the mid 1990s but following the global financial crisis, an almost complete move to a fully cleared market has taken place. The Baltic’s forward curves are widely used for mark-to-market purposes and this development strengthens that position.

Susan Glover, chair of the FMIUG (tanker derivatives users’ group) commented: “I am very pleased that the consolidated forward curve requested by the market is now being delivered with the agreement and cooperation of the clearing houses. I believe this demonstrates unified support for this welcome initiative.”

The new activity weighted forward curve will be published from today.