DEFINITION of 'Baltic Exchange'

An exchange that handles the trading and settlement of both physical contracts and derivatives relating to shipping and maritime transportation. The Baltic Exchange provides daily prices for freight, and tracks shipping costs through several indexes. Traders use these indexes to settle forward freight agreements (FFAs), which are freight futures contracts.

BREAKING DOWN 'Baltic Exchange'

The Baltic Exchange was founded in 1744 in London. It publishes the Baltic Dry Index (BDI), which provides pricing information on shipping various cargo types along different routes. The index is used by economists and investors to determine the demand for shipping versus the total shipping capacity.

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