The International Maritime Exchange (IMAREX)

The International Maritime Exchange (IMAREX) was established in 2001 in Oslo (Norway), to provide a risk management exchange through derivative contracts for the maritime industry. It operated for more than a decade until July 2013, when it ceased trading.4 An objective of IMAREX was to increase freight derivatives liquidity through: (i) market-maker agreements with professional companies, attracting as members the largest existing freight derivative players; (ii) increasing the trading volumes of committed IMAREX shareholders, trading on expectations on future freight market directions; and (iii) offering extensive customer training and support. Customer segments included international shipping companies, energy companies and refiners, commodity trading houses, and financial trading houses, amongst others.

IMAREX offered trading of tanker freight futures contracts since 2001 and dry cargo freight futures contracts since 2002. The futures contracts traded at IMAREX were cleared by the Norwegian Futures and Options Clearing House (NOS). In September 2006, NOS and IMAREX merged, creating the IMAREX NOS group. Trading was facilitated directly on the IMAREX trading screen, via the group’s broker teams in Oslo, Singapore and New York or via an authorised third-party freight derivatives broker (e.g. Clarksons, SSY, FIS, etc.). In May 2011, Marex Group, a broker of wholesale energy and other commodity products, acquired Spectron Group Ltd from IMAREX to become Marex-Spectron. This is now a UK-based broker of commodity and energy financial products, providing voice and electronic trading and clearing services.

In addition to FFAs, IMAREX also offered freight option contracts. On 1 June 2005 the first tanker IMAREX Freight Option (IFO) contract was introduced, on route TD3 of the BDTI (AG—East, VLCC 260,000mt) and cleared through NOS. IFOs were available for trading and clearing until 2002 for all IMAREX and NOS members and were structured as monthly call and put Asian style options, offered in monthly, quarterly and yearly maturities and with a minimum contract size of five lots. Tanker and dry-bulk IFOs were settled against the Baltic Exchange quotes, with the exception of routes TC4 and TC5 where Platts assessments were used. Specifically, settlement prices for the tanker routes (measured in Worldscale points, where 1 lot = l,000mt), and the dry-bulk timecharter routes (measured in USS/day, where 1 lot = 1 day) were calculated as the arithmetic average across all trading days in a calendar month and those for the dry-bulk voyage routes (measured in US$/ton, where 1 lot = l,000mt) were calculated as the arithmetic average of the spot prices over the delivery period. In the past, IMAREX traded IFO contracts on the following tanker routes: TD3 (AG—East), TD5 (West Africa-USAC), TD7 (North Sea—Continent), TD17 (Baltic Sea—Continent), TC2 (Continent—USAC), TC4 (Singapore—Japan), TC5 (AG-Japan) and TC6 (Algeria—Euromed). Moreover, dry- bulk IFOs had been introduced on the Capesize, Panamax and Supramax time-charter basket averages and on Capesize C4 voyage route.

Clearing IMAREX trades: the Norwegian Futures and Options Clearing House (NOS)

NOS was originally established in 1987 and was initially licensed by the Norwegian Ministry of Finance to provide clearing services under the Norwegian Stock Act of 2000. It was supervised by the Banking, Insurance and Securities Commission of Norway (Kredittilsynet), and was a limited company, owned by shareholders, including banks, securities companies, insurance companies, financial investors and private persons. After the closure of IMAREX, the NOS was renamed NOS Clearing. Later, in July 2012, the NASDAQ OMX Stockholm AB, which is a part of NASDAQ OMX Group Inc., acquired the NOS clearing-house from IMAREX and became fully integrated as the NASDAQ OMX Clearing in April 2014. NASDAQ OMX Clearing is further discussed later in this chapter.

Following the global financial crisis at the end of 2008, NOS Clearing, during October of the same year, launched an emergency service called Multilateral Netting Facility (MNF). The aim of the facility' is to: (i) reduce the probability of default due to lack of cash and lower counterparty quality; (ii) reduce the funding cost and cash-flow problems related to the final settlement of OTC contracts; (iii) resolve the payment chains by netting of settlements on the settlement day; and (iv) reduce administration costs (no invoicing, NOS procedures, net settlement reports and trade-lists). If one counterparty' does not pay', NOS will declare the non-paying participant in default and notify immediately the other participants. Then, NOS will allow for one re-run of the netting calculation without the trades of the defaulting participants. Finally, if there is another default, the netting fails, and the trades are settled according to the original FFA contract.

The Nasdaq Energy Futures Exchange (NFX)

In July 2015, Nasdaq introduced a US-based platform for energy' futures trading, the Nasdaq Energy Futures Exchange (NFX). Its core products included futures and options on crude oil, natural gas, power and other products, with identical contract specifications to those of CME Group and ICE, except that they were cash-settled rather than physically delivered. Founding members included Goldman Sachs, JP Morgan Chase, ABN Amro, Advantage Futures, Morgan Stanley and Virtu Financial. At the launch date, 16 brokers had been approved as members, with about 40 market-makers and proprietary trading firms signing up to trade on the exchange. Real-time market data were provided by Bloomberg, and connectivity was provided by' Trading Technologies. Only six months later, by 11 January 2016, NFX recorded a daily high-volume mark of 60,350 contracts in natural gas options (trading symbol: LNQ), which represented a 27% market share of the total volume across all energy futures exchanges. However, in November 2019, Nasdaq and EEX released a joint statement under which Nasdaq confirmed that it has agreed to sell its struggling energy- futures business, NFX, to the EEX Group (a unit of German exchange group Deutsche Borse). In February 2020, NFX’s core assets — including its oil, gas, electricity, metals and freight futures markets - were transferred to EEX, i.e. the Deutsche Borse s energy' arm.

NFX offered a wide range of freight futures written upon the constituent routes of the BDTI and the BCTI published by' the Baltic Exchange, apart from route TC5, in which case the Platts individual route freight assessment was used. For each route, Nasdaq trading members could take positions on the offered freight futures with maturities of “Month”, “Quarter and “Year”. The minimum contract size was 1 lot, which refers to l,000mt of cargo, for the one-month maturity contract; 3 lots (3,000mt) for the

Table 5.2 Nasdaq Asian freight options, 2019

Panel A: Tanker Asian options



Route description

Cargo size (mt)







West Africa-USAC




North Sea-Continent




Baltic Sea-Continent


















Panel 2: Dry-bulk Asian options



4 T/C average




5 T/C average




4 T/C average




6 T/C average




10 T/C average




6 T/C average


Source: Nasdaq

one-quarter contract; and 12 lots (12,000mt) for the one-year contract. All contracts were offered following a daily margining, i.e. they were marked-to-market at the end of every day against prices supplied by the Baltic Exchange. Trading through a margin account is discussed later in this chapter.

NFX also offered dry-bulk futures contracts on the voyage routes C3, C4, C5 and C7 of the Capesize and the PI A, P2A and P3A time-charter Panamax routes. These were the routes that attracted most of the dry-bulk freight derivatives trading, both at Nasdaq and in OTC markets. Finally, the NFX offered futures contracts on time-charter “baskets'’ of routes, i.e. the four time-charter routes C8, C9, CIO and Cll of the BCI were used to calculate CS4 T/C; the routes PI A, P2A, P3A and P4 of the BP1 formed the PM4 T/C; the routes SI A, SIB, S2, S3, S4A and S4B formed the SM6 contract; while the HS1, HS2, HS3, HS4, HS5 and HS6 of the BHSI formed the HS6 T/C contract. These freight derivative products could be of interest for principals that, say, employ their Capesize vessels across all time-charter routes of the BCI, and seek to protect themselves against anticipated adverse movements in these time-charter freight rates.

In addition to freight futures the NFX also offered freight options. Table 5.2 presents the freight options offered by Nasdaq’s NFX until November 2019. As can be observed, they comprise dirty and clean tanker single routes, as well as the typical time-charter baskets for dry-bulk trades.

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