Brokers seek bigger tranche of Singapore's Baltic Exchange?s revenue
SINGAPORE's shipping bourse, the Baltic Exchange, is prepared to pay shipbrokers who provide it with freight and time-charter assessments, ending a longstanding practice whereby data was supplied for free as part of membership of the London-based bourse
SINGAPORE's shipping bourse, the Baltic Exchange, is prepared to pay shipbrokers who provide it with freight and time-charter assessments, ending a longstanding practice whereby data was supplied for free as part of membership of the London-based bourse.
Chief executive Mark Jackson told London's Lloyd's List the Baltic Exchange was talking with shipbrokers that provide its core data, acknowledged they want a better deal, and are discussing options.
The Singapore Exchange wrapped up its US$108 million purchase of the London exchange three years ago. Brokers, also known as panellists, signed a three-year deal to continue providing assessments for the shipping indices provider in exchange for free membership and exclusive indices distribution rights, according to Mr Jackson. The agreement comes up for renewal in mid-November, covering 30 panellists globally.
In addition to providing physical freight benchmarks, indices are also used to settle the growing freight derivatives market for dry bulk, crude and refined products.
'What is coming towards us is a situation whereby the panellists are saying: 'Well, we can go now,' but they haven't actually said that to me yet,' Mr Jackson said.
'There's lots of positioning; the panellists are saying: 'Look, the indices are encroaching more and more on our business.' We feel that there is a balance here at all times, whereby indices help markets to grow, then brokers then have more fixtures to do because the traders are doing more business.'It's revenue stream.?Our position is that we?re saying: 'Let's work together and see how we can monetise the data that we have in new ways and sharing that.''
In spite of their grievances, key shipbrokers remain committed to the Baltic Exchange, amid new indices challenges. S&P Global Platts, which provides energy, freight and commodities price assessments worldwide, has added two freight indices, including one that directly challenges the Baltic?s busiest route by volume.
'Platts is a definitely a credible threat,' said Mr Jackson. 'As an organisation, it's very experienced in producing benchmarks.
'The thing is, they're applying a methodology that works in high-volume markets, based upon this close-of-market price for freight, which doesn't have that same level of transaction.'
On September 30, Platts launched a weighted index for capesize vessels. A year earlier, the group also launched a freight index for rapidly evolving US Gulf-China very large crude carrier route, beating the Baltic. This included a swap for forward freight agreements and some trading is now done on this swap.
The capesize assessment is a more serious challenge. Some 60 per cent of Forward Freight Agreement (FFA) dry bulk trades last year were settled against the Baltic capesize time charter equivalent index, data shows.
Eleven of the world's largest shipbrokers have established lobby group Competitive ShipBrokers Ltd, which is currently in talks about an historic change in relationship between shipbrokers and the Baltic Exchange.
'We're looking at it in its entirety,' said the group's founder Pierre Aury. 'It's impossible to put an exact financial value on it; it depends on the brokerage firm. Small firms are, in relative terms, putting in a lot of time compared to larger firms to provide assessments.