“Private” sea freight indexes hide Libor like skeletons?

EU Commissioner Michel Barnier, responsible for Internal Market and Services

EU Commissioner Michel Barnier, responsible for Internal Market and Services

The almost three centuries old Baltic Exchange is a private and closed platform, where around 60 shipping brokers based mainly in London are contributing voluntarily their cargo prices. On the base of those contributions the Exchange publishes benchmark freight price indexes for a round number of 70 sea routes and vessel categories.

The indexes are used as a benchmark for almost half of all ocean transport contracts, oil tankers and dry cargo included. There is no external control or any other liability over the truthfulness of the brokers’ contributions or on the way they are used by the Exchange services, to calculate the indexes.Over the past years those benchmark prices are also used as a base for shipping derivatives trading and hedge fund transactions, a new and fast developing financial market. Specialised intermediaries and a small number of major banks involved in shipping loans and transactions are behind this new derivatives and hedging markets.

Since last year however British, American and European financial market regulators after months of investigations came upon criminal and fraudulent behaviour by banks and bank dealers, who influenced according to their interests the daily setting of Libor and Euribor. Those two major interest rate benchmarks are used by the entire financial world, in concluding loan contracts, financial derivative pricing and hedging markets. UBS AG, Royal Bank of Scotland Group Plc, Barclays Plc , Citigroup Inc. and Deutsche Bank AG are under scrutiny and so far some of them have agreed to pay huge fines for their implication in this conspiracy plot to fraudulently setting Libor quotes. Only last week UBS agreed to pay a fine of $1.5 billion and some of its employees face criminal conspiracy charges in the US.

This was a major blow to the entire financial industry, with its management and dealers being exposed to have acted as common criminals. As a result regulators in Britain, Europe and the US are looking now for ways and means to set rules and controls in the so far “private” banking procedure of Libor and Euribor setting.

Given however that the same banks and financial firms are also implicated in the “private” and completely “free” procedure of setting the Baltic Exchange’s sea freight indexes, the European Authorities initiated an investigation on that too. The EU now examines the prospect of opening to official control the Baltic Exchange’s procedures, also making the freight price announcements by brokers compulsory and traceable. To this effect EU Commissioner Michel Barnier proposes the creation of an official digital platform for all that, where everything will be open to control by the authorities.

As it is easily understood that the sea freight prices reporting brokers, the Baltic Exchange and intermediating banks have vehemently rejected this prospect, threatening to abandon London and move their activities outside the European Union. They say that government interference and control over their “private” doings will completely ruin this market.

The problem is however where in the world they can move to? If the EU and the US decide to place the Baltic Exchange structures under government control on an official platform, the only place they can move their “free” doings is Asia. Unfortunately for them, the Shanghai Shipping Exchange has initiated one month ago its own sea freight benchmark indexes, directly rival to Baltic Exchange ones. Obviously there is now less room in South East Asia, for a second sea freight index.

In any case the Baltic Exchange activities, having attracted the interest of the authorities, will remain under investigation. It is more than certain that soon we will be hearing more from this source.

The Sting will be closely following the story to inform its readers.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Innovating together: connectivity that matters at ITU Telecom World 2019 – in association with The European Sting

Can we balance conservation and development? Science says yes

European Banking Union: no one is perfect

World Health Organisation and young doctors: is there any place for improvement?

Gaza probe finds ‘reasonable grounds’ Israeli forces committed international human rights violations

Tuesday’s Daily Brief: Bicycles for the environment, new leader for the UN General Assembly, UN values, Ebola, Syria and Libya

Building climate resilience and peace, go hand in hand for Africa’s Sahel – UN forum

The world condemned by neo-liberals to feed trillions to banks: the New Deal exorcised

The remote doctor in the 21st century

Four lessons from Africa on building effective business ecosystems

Gender is where the feminist and LGBTI movements meet. Here’s why

Generation Z will outnumber Millennials by 2019

EU budget: Commission takes steps to make €11.5 billion available for crisis repair and recovery in 2020

New York City has a plan to fight fast fashion waste. Here’s how it works

JADE Spring Conference 2018 is on its way: Young entrepreneurs gather in Brussels to shape Europe

Coronavirus: Commission launches data sharing platform for researchers

Water scarcity is a growing problem across the Middle East. Is this how we solve it?

North Macedonia President, credits dialogue and diplomacy for setting a decades-long ‘name dispute’

Commission welcomes Bulgaria and Croatia’s entry into the Exchange Rate Mechanism II

This is how a smart factory actually works

Germany fears that Americans and Russians want to partition Europe again

Vaccination: European Commission and World Health Organization join forces to promote the benefits of vaccines

State aid: Commission expands Temporary Framework to further support micro, small and start-up companies and incentivise private investments

3 reasons why most Africans aren’t on the internet – and how to connect them

Republic of Korea President proposes DMZ as future ‘peace and cooperation district’ on Peninsula

Working with millennials, leaders say humility works better than bossing around

This surprising change can help the auto industry tackle emissions goals

Earth has more trees than it did 35 years ago – but there’s a huge catch

A few, or rather two, trade and economic alliances may rule our brave new world

These 4 scenarios show how we might be working in the future

More attacks, ‘persisting security challenges’ threaten progress in West Africa, Sahel

ITU Telecom World 2016: it’s all about working together

“Beating pollution for our planet”, a Sting Exclusive by Mr Erik Solheim, the Executive Director of the United Nations Environment

The refugee crisis brings to light EU’s most horrible flaws and nightmares

Why Europe is more competitive than the US

Drastic deterioration in security across Burkina Faso as 70,000 flee their homes in past two months, UN warns

EU to take action against fake news and foreign electoral interference

Who will secure Lithuania?

Central banking in times of complexity

Syria: UN health agency highlights ‘critical health threats’ facing Idlib civilians

It is me

COVID-19 has accelerated India’s digital reset

Yemen: EU allocates over €70 million to help most vulnerable population

Western Balkans: An Economic and Investment Plan to support the economic recovery and convergence

From books to bikes: 4 unexpected gender gaps

Why cities hold the key to safe, orderly migration

Parliament adopts new rules for short-stay visas

One year on: EU-Canada trade agreement delivers positive results

Nairobi summit: Women’s empowerment a ‘game changer’ for sustainable development

Can alternatives to rhino horn save these gentle giants?

Brexit: MEPs concerned about citizens’ rights

South Sudan: UN official welcomes release of women and children abducted by armed group

German political spillovers: ECB’s Draghi resists first attacks by AfD

Mergers: Commission clears acquisition of Refinitiv by London Stock Exchange Group, subject to conditions

Three scenarios for the future of geopolitics

Yemen bus attack just the latest outrage against civilians: UN agencies

This Chinese megacity is building a massive car-free district

Sweden has invented a word to encourage people not to fly. And it’s working

Apple® logo (copyright: Apple)

Apple takes further step into music: EU Regulators formally approve its planned Shazam acquisition

These are the world’s most future-proof cities

More Stings?

Advertising

Comments

  1. I’m amazed, I must say. Rarely do I come across a blog that’s
    both educative and engaging, and without a doubt, you’ve hit the nail
    on the head. The issue is an issue that not enough folks are speaking intelligently about.

    Now i’m very happy I stumbled across this in my search for something regarding this.

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s