The freight market is the market in the shipping industry which covers the transport of cargo. The first official freight market was the Baltic shipping exchange in the nineteenth century. However before that time there were already several places which could be seen as centres of freight market, for instance, the Baltic coffee house. Transport of goods over sea can be regulated in different types of chartering.
The freight derivatives market is a relatively new part of the freight market. The idea of the freight derivatives market is to minimize the future risks of trading goods. This is necessary because a trader may buy a commodity which he wants to ship in the future and sell on another place. However if the freight rate would rise to a higher point by the time he wants to ship he will have to calculate for this unexpected expense and he may very well lose a lot of money when selling the commodity again. The freight derivatives market handles this problem by giving an estimate of what the future of the freight market will be. So the ship-owner and the trader can agree a price that will most likely be close to the freight rate at that future time this limiting both their risks. The freight future market started with trading through the Baltic International Freight Futures Exchange in 1985 which was later replaced by forward freight agreements.
Martin Stopford; Maritime Economics third edition (2009)