LONDON (Reuters) – The Baltic Exchange is pressing ahead with launching a central screen as soon as it can to trade dry bulk freight derivatives despite broker worries over current proposals and a potential challenge from a separate platform.

In May the Baltic Exchange said it had applied for multilateral trading facility (MTF) status with the UK's Financial Services Authority (FSA) for BaltEx which it expected would go live by the end of 2010, aiming to boost market activity.

But freight derivatives brokers, fearing a loss of commission business in this niche market, have objected to an FSA regulatory requirement which would take away the compulsory nomination of brokers in every trade. The FSA declined to comment.

"We are still working to get things ready as soon as we can," Baltic Exchange chief executive Jeremy Penn told Reuters.

Freight forward agreements (FFAs), which allow a buyer to take a position on where freight rates will stand at a point in the future, are not traded on an exchange.

"It comes down to how the screen will work in terms of how a trade is launched and who gets paid for it and whether there is any potential for alternative jurisdictions if it can't work satisfactorily in the UK," a freight derivatives broker said.

Dorian Benson, chairman of the FFABA, an association which represents the views of freight derivatives brokers, said its relationship with the Baltic Exchange and the FMIUG freight users' body remained "very amicable" with all sides working to find a suitable product for traders and brokers.

"In its current format the non compulsory broker nomination issue is something that members of the FFABA feel uncomfortable with and in its current format do not feel in a position to offer its full support," said Benson, who is also global head of dry FFAs at GFI brokers.

The Baltic Exchange has faced setbacks in the past over developing a central trading screen from FFA brokers.

Penn said it sought to build a "consensus of support." When asked if it would look at other jurisdictions, he said it would consider "every option."

"The reason why the Baltic was asked to and felt moved to move ahead with this project was because of the industry desire for a neutral and independent shipping centric organisation to create a market place for FFAs," he said.

"If those are the criteria that the industry wishes to see met, then I think it is pretty clear that the Baltic is still the best available solution."

Penn said it expected the screen's software to be "ready for implementation" in November.

"When it makes sense to actually roll it out is a question of whether you are too late vis a vis the Christmas break."

The FFA market has grown from its beginnings in 1985 and was estimated to be valued at an all-time high of $130 billion to $150 billion in 2008 before economic turmoil.

The value of dry transactions fell to around $35 billion last year. Broker FIS estimated the value of the dry FFA market could reach $37 billion in 2010.

In the latest challenge, Singapore-headquartered company Cleartrade Exchange said it was working on launching a trading platform and was in talks for regulatory approval with the Monetary Authority of Singapore, the city-state's central bank.

The company said its product would be a "central market place" for FFAs which would be expanded to other over-the-counter commodity swaps.

"FIS is the first client of Cleartrade and we will be announcing others very soon," its director Richard Baker said. John Banaszkiewicz, managing director of FIS, one of the biggest dry FFA brokers, said Cleartrade's plans "ticked all of our boxes." Banaszkiewicz is the majority shareholder in Cleartrade. Cleartrade said it would seek other shareholders to dilute his stakeholding in the near future.

"The Baltic might have a solution but it looks a bit in disarray," Banaszkiewicz said.

Penn said "events had not particularly affected our timing." "I am sure we have not missed the opportunity," he added.

Earlier this year the London Metal Exchange (LME) said it had proposed a joint venture with the Baltic Exchange to launch an exchange for freight derivatives trading, which met with opposition from market players.

Brokers said the LME was unlikely to pursue its proposal.

"We would be happy to assist the Baltic and its members in developing freight derivatives markets but for now the Baltic has decided to pursue its own path," said Chris Evans, the LME's head of business development.