London - 5th April 2006 - The Forward Freight Agreement Brokers Association (FFABA) is concerned by the proposed merger between Imarex, a broker, and NOS - the main freight derivatives clearing house.
The association emphasises that a single organisation providing both broking and clearing will reduce competition by disclosing price-sensitive information to a single broker. This will eventually result in higher trading and hedging costs for shipping companies, energy companies and utilities and other institutions.
Also, FFABA members recently signed a new clearing agreement with NOS but this proposed merger appears to go against this by, in effect, granting a preferred status to a single broker.
"This comes at a time when NOS has been saying it was disengaging from Imarex and that it was levelling the playing field for all market participants and liquidity pools.", said John Wright, FFABA chair, "The market will certainly question the neutrality of this merger and once again the issue of Chinese Walls will resurface between NOS and Imarex. The freight derivatives market is proving to be a most useful way for all sorts of organisations to manage risk. If this monopolistic merger were to go ahead the development of the market could be set back significantly."