One of the major goals of the European Union's transport policy is to increase the market share of rail freight transports. With the Internet, globalization, and just-in-time production, the future of freight transport has moved to high-value and lightweight goods. Rail freight has had difficulty entering this market. Thus, a multipronged strategy is required for improving the rail freight market in which freight is consolidated and transported in Europe by encouraging new players to enter the market. A key pillar of this strategy is the introduction of freight exchanges that are based on principles similar to those of power exchanges. The latter are already well established and operational in the energy sector. This paper describes the market and operational requirements for efficient and reliable freight exchanges in the European freight market from which the rail sector can profit. Lessons learned from the energy sector were reviewed and applied in the context of the rail freight sector in this study. The analysis implies that for rail freight to function, as a pre requisite the freight exchanges would need to provide high liquidity in the market and be neutral to all parties, including shippers and forwarders. Furthermore, to facilitate competition, such exchanges would have to send price signals in the market like power exchanges do. The exchanges would allow automatic bidding, and the transaction process would be efficient and reliable. The rail freight operators would need to provide standardized indistinguishable products to serve as commodities on the freight exchanges.
