Freight derivative
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A Freight derivative is a financial instrument for trading in future levels of freight rates, for dry bulk carriers and tankers. These instruments are settled against various freight rate indices published by the Baltic Exchange and Platt's. FFAs are usually traded over the counter, but screen-based trading is becoming more popular as time passes by. Trades can be given up for clearing by the broker to one of the clearing houses that support such trades. There are four clearing houses on freight: NOS (Norwegian), LCH.Clearnet, NYMEX Clearport, SGX (Singapore). Freight derivatives are primarily used by shipowners and operators, oil companies, trading companies and grain houses as tools for managing freight rate risk.
