“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 Milestones

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

Here are three ways Africa’s youth are defeating corruption

Antitrust: Commission opens investigation into PPC’s behaviour in the Greek wholesale electricity market

European Commission kicks off major EU trade policy review

A Brussels antithesis reveals where the EU is heading

Global public-private collaboration tackles cybersecurity skills gap

Young people meet in Malta to shape the future of Europe

How should cities prepare for self-driving cars? Here’s a roadmap

In Washington D.C., Guterres signs pact with World Bank, meets US President Trump

More than 90% of the world’s children are breathing toxic air

How to make PHC a favourable career choice for medical students: Strategies and reflections

Ground-breaking clean air protocol to guard human health and the planet, enters into force

‘Water-forecasting’ and fish farms fed on waste: how innovation is driving the blue economy

Historic first, as Tolstoy’s War and Peace lands in Geneva, to mark international centenary

10 reasons why today’s cyber leaders are tomorrow’s world leaders

Terror attacks strike people ‘from all walks of life, the UN included’

EU Parliament approves CETA: the EU-Canada free trade deal sees the light in Trump’s gloomy era

Algorithms could give the world its first ‘born digital’ free trade agreement in Africa

Sudan military committed to ‘ensuring stability’ and ‘peaceful transition’ says senior diplomat, as UN rights chief appeals for protesters’ rights to be upheld

UN rights expert ‘strongly recommends’ probe by International Criminal Court into ‘decades of crimes’ in Myanmar

EU-Vietnam trade agreement enters into force

The EU patent space and Unified Court are born

JADE May Meeting last call for participants – join us in Zagreb

Meeting of top scientists underway to slow coronavirus spread

Impacts of COVID-19: lessons and strategies for the future

Veteran public official from Portugal elected to lead UN migration agency

Twenty days that may remold the future of Europe

EU approves disbursement of €500 million in macro-financial assistance to Ukraine

Commission to decide definitely on genetically modified Maize 1507 seed

Migration surge leaves children stranded, begging on Djibouti’s streets

UN police officer recognized for protecting vulnerable Somali women from abuse

UN Human Rights Council stands firm on LGBTI violence, Syria detainees and Philippines ‘war on drugs’

EU Cohesion policy: Commission and EBRD promote innovative use of data in public procurement involving EU funds

Why the 33,000 staff European Commission did not have a real contingency plan for the refugee crisis?

How can impact investors balance the green energy equation?

The Europeans back Russia-Turkey on Syria: A ‘Waterloo’ for Saudis and their Crown Prince

We can feed the world in a sustainable way, but we need to act now

Preventing the Pandemic of Mental Illness

Vegans in France are using extreme tactics to stop people eating meat

Real EU unemployment rate at 10.2%+4.1%+4.7%: Eurostat Update

The Indian case: health policies need to keep pace with public health literacy

Has the EU economy truly revived from the financial crisis?

EU’s judicial cooperation arm, Eurojust, to become more effective with new rules

Re-open EU: Commission launches a website to safely resume travelling and tourism in the EU

International co-operation vital to improve integration of refugees

This new form of currency could transform the way we see money

Palliative Care: Medicine for the “Moribund”?

Lithuania finds the ways to maintain its energy security

European platform to combat homelessness is launched

UN gears up emergency food aid for hurricane-struck region of Bahamas, as death toll rises

European Agenda on Migration: Still fragile situation gives no cause for complacency

How Hawaii plans to be the first US state to run entirely on clean energy

Fairer food supply chain: Agriculture MEPs clamp down on unfair trading

The Free World Experience Report – LGBTQI+ health on the spot

GSMA announces new keynote speakers for 2018 Mobile World Congress

How impact finance can alleviate COVID-19’s economic symptoms

The result of European Elections 2019 seals the end of the business as usual era in Brussels

How to plan your company’s future during the pandemic

UN agencies ramp up Somalia measles and polio campaign

Building a Climate-Resilient Future – A new EU Strategy on Adaptation to Climate Change

Syria: Thousands of children ‘hemmed in’ by ‘brutal and gratuitous’ spike in violence

More Stings?

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.

Leave a Reply to Animas online hack Tool Cancel reply

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