LME Make Effort for Baltic Alliance
It was reported that the London Metal Exchange launched a fresh effort on Friday to agree an alliance with the Baltic Exchange with a formal proposal to unite two of the City of London’s most historic financial institutions and transform global freight trading.
The LME suggested a new exchange – the London Baltic FFA Exchange – should be created as a joint venture between it and the Baltic. The joint venture proposed by the LME would bring the trading of Forward Freight Agreements on-exchange. FFAs, the contracts that allow parties to hedge the costs associated with shipping freight, are currently traded in a telephone, over-the counter market. The Baltic Exchange provides the benchmark indices used to price and settle FFAs.
Donald Brydon, LME chairman, said: “This proposal commands some compelling logic for expanding the FFA market in a joint venture with the LME. Our original approaches, based on electronic trading on a regulated exchange, are now even more relevant given the regulatory and political pressures all OTC markets are facing.”
A spokesman for the Baltic Exchange said the LME’s proposals would be “carefully considered”, after an initial approach last year met with a frosty reception.