Settlement rate

The settlement rate is the final price an FFA settles against: the arithmetic average of the relevant Baltic spot index assessments over the determination period, typically every business day of a calendar month. It is the floating leg of the contract for difference, so the contract pays the difference between the agreed FFA price and this settlement average. It should be distinguished from the Baltic Forward Assessment (BFA), the daily end-of-day mark of forward FFA prices from the broker panel: the BFA marks open positions to market, while the settlement rate closes them at expiry. The settlement rate is published by the Baltic Exchange and is binding on the clearing house.