The Hindu Business Line : Screen-based FFA

The shareholders of CIF Ltd., the new company formed by Clarksons, Ifchor and FIS, the founding fathers of modern forward freight agreement (FFA) market, have announced that the line launch of their screen-based FFA facility will happen at the end of May. This will be the first multi-broker dry cargo freight derivatives trading screen and perhaps the first multi-broker solution in any market. Both principal and authorised brokers will post prices on the screen. The FFA, it may be noted, is a bit like a legally binding bet between two people about what the freight rates will be in future. If an owner is profiting from rising rates, but is apprehensive of their probable fall, he can enter into an FFA. If the market goes down, then the other party to the FFA contract will pay him money that offsets the shortfall in earnings. If the market goes up, the owner will have to pay, parting some of its trading profits.

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