Baltic Exchange: What It Is, How It Works

What is the Baltic Exchange?

The Baltic Exchange is a London-based exchange that provides real-time maritime shipping information to traders for settling physical and derivative shipping contracts. The exchange has regional offices in Singapore, Shanghai, and Athens.

Understanding the Baltic Exchange

The Baltic Exchange was started in 1744 at a coffee house, where shipowners and merchants gathered to transact business, in Threadneedle Street in London. To bring order to informal trades, membership and rules of trades were devised in 1823. As England's trading connections and prowess grew, the exchange also gained in the number of its members and transactions. It was acquired by the Singapore Exchange SGX in November 2016.

Currently, the Baltic Exchange provides the following set of services:

• Independent, high quality dry, wet and gas freight market information
• Self-regulated chartering, sale and purchase and freight derivatives markets
• Central forum for competing freight market interests
• Framework ensuring high standards of business practice and co-operation 
• London-based business facilities for members

Using the Baltic Exchange

The exchange publishes five major Baltic Indices. They are the Baltic Exchange Capesize Index (BCI); Baltic Exchange Panamax Index (BPI); the Baltic Exchange Supramax Index (BSI); the Baltic Exchange Handysize index (BHSI) and the Baltic Exchange Dry Index (BDI). These indices are estimates of moving cargoes of raw materials across the seas by leading shipbrokers and are used in the freight derivatives industry. They are used to settle physical contracts as well as derivatives based on those contracts.

Members of the Baltic Exchange pay an annual membership fee. These fees are tiered and include anything from simple access to the Baltic Exchange website and index information to full use of the Baltic Exchange dispute resolution services, events and settling of FFAs. Access to the website gives members access to over 20 different indexes of shipping costs, information on fixtures, or finished agreements for shipping contracts, training programs and the Baltic Briefing, a regular industry newsletter. Full membership also allows them to use the Baltic Exchange services to find shipping partners and to negotiate disputes. The Baltic Exchange also hosts social membership events.