The Baltic Exchange launches air cargo derivatives indices

By Damian Brett

Derivatives trading platform the Baltic Exchange has launched weekly airfreight indices to allow companies to hedge against rate swings.

The Baltic Exchange has partnered with Hong Kong-based air cargo pricing publisher Tac Index on the new indices, which include six outbound indices and 17 individual destination baskets.

These products will be branded as the ‘Baltic Air Freight Index (BAI) – powered by Tac data’ and will come under the governance of Baltic Exchange Information Services Limited (BEISL), with Tac Index acting as the calculating agent.

Priced in $/kg, the indices reflect transacted rates from key hubs: London, Frankfurt, Hong Kong, Chicago, Shanghai and Singapore to the main import regions globally. 

Rates are provided to the calculating agent by leading international freight forwarders and published each Monday by the Baltic Exchange.

The indices are available to subscribers to the BAI data – however, a headline BAI index is available to any current subscriber to the Baltic Exchange indices. A separate Air Freight Guide will be published.

Using derivatives can help businesses hedge their exposure to offer more certainty and protect against market drop offs.

However, they can also limit a company’s ability to benefit from an upswing.

“The move follows a rigorous review of the TAC Index’s methodology to ensure that it is compliant with the principles set out by the International Organization of Securities Commissions (IOSCO),” the Baltic Exchange said.

“We’re delighted to be adding airfreight assessments to our growing list of assessments, enabling freight risk management through trusted benchmarks” said Baltic Exchange chief executive Mark Jackson.

“The Baltic Air Freight Index provides an independent, uncompromised view of the airfreight market and our oversight will help ensure that the Index can become listed by financial clearing houses. This would provide the air cargo industry with new ways of managing its freight rate risk and potentially bring in new market participants.”

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