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The Baltic Exchange is a London-based organization, composed primarily of ship brokers, ship owners, and freight charterers, that provides daily news and information about the maritime market. The Exchange monitors international shipping operations and price fluctuations for freight. It publishes daily freight market prices and shipping cost indices, which shippers and investors can use to purchase freight futures, set terms for financial arrangements, and settle the terms of derivative contracts. The Baltic Exchange acts as a floor for futures trading. It is a resource for maritime investors worldwide, as well as being an organization of shippers.
The Baltic Exchange began as a coffeehouse meeting of London sea captains and merchants in the 1700s. The original members created rules for appropriate business dealing, brokered deals with investors, and negotiated pricing for shipments around the world. Their work laid the foundation for the Exchange’s modern dealings.
As of 2010, the Baltic Exchange was entirely owned by its members, numbering around 600 companies and 2,000 individuals. While primarily composed of those in the shipping business, membership has also included financial experts, lawyers, and representatives of the insurance industry. There are no nationality restrictions on membership, but corporate members have been predominantly located in the United Kingdom or continental Europe. All members must do is pay the membership dues and agree to the Baltic Exchange “code of business.” The code sets certain standards for doing business with shippers, and breaking the code can be grounds for membership rescission.
The Baltic Exchange’s primary business is the publication of daily indices on various aspects of the shipping industry, including detailed statistics and readings on a variety of freight and shipping futures. Investors and shippers rely on accurate maritime market information in order to negotiate fair contracts.
The Exchange maintains up-to-the-minute data, and acts as a floor for futures transactions and exchanges. Sellers of maritime cargo and freight make decisions based on Baltic Exchange publications, and the Baltic Exchange acts as a medium through which they finalize their transactions. In this way, the Exchange is similar to U.S.-based merchant exchanges, like the Chicago Merchantile Exchange. That exchange is publicly-traded, however, and is concerned with more than just maritime transport exchanges. Also, it lacks the core membership that the Baltic Exchange is in many ways built around.
The Baltic Exchange promotes itself as a company that is for the shipping industry, and also wholly of it. In addition to its work in futures, the Exchange also plays a leading part in shaping the conduct and business practices of the shipping industry as a whole. The Exchange regularly runs international seminars on a variety of transport economics topics, and offers training courses on freight derivatives, risk management for both shippers and investors, and freight trading, among other things. It also facilitates an internationally-renowned dispute resolution forum for contract and other disputes, and maintains a database of those among its members who can serve as expert witnesses in maritime law trials.
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