What Happened at the Month-End Fix?
Posted by Colin Lambert. Last updated: June 2, 2021
Last month The Full FX published the first in a regular series of pieces looking at price action over the month end, London 4pm Fix, and comparing the differences between two regulated benchmark rates, WMR and Siren.
The May month end picture was complicated further by it being a public holiday in the UK and the US, meaning liquidity was at a premium, especially at 5pm central European time as those markets were closing down. With this in mind, we are publishing two tables, one comparing performance on the illiquid month-end, as well as for Friday May 28, when some month-end fixings were transacted with the public holidays in mind.
After a mis-call in April, when the expected dollar selling did not materialise (the opposite did), May was an easier call for analysts with dollar selling expected. This did in deed materialise.
The data tables below offer a comparison with data delivered by Raidne, which owns the Siren Fix. The Full FX has independently verified the WMR data, which is calculated from New Change FX data by Raidne, reflects the month-end rates delivered by WMR.
| May 28 |
| CCY Pair | WMR 4pm Fix* | Siren Fix | 100%** | 80% | 70% | 60% |
| EUR/USD | 1.21811 | 1.21822 | $90 | $54 | $36 | $18 |
| USD/JPY | 109.968 | 109.963 | $45 | $27 | $18 | $9 |
| GBP/USD | 1.41776 | 1.41676 | $706 | $424 | $282 | $141 |
| AUD/USD | 0.77097 | 0.77106 | $117 | $70 | $47 | $23 |
| USD/CAD | 1.20787 | 1.20736 | $422 | $253 | $169 | $84 |
| NZD/USD | 0.72502 | 0.72529 | $372 | $223 | $149 | $74 |
| USD/CHF | 0.90003 | 0.89997 | $67 | $40 | $27 | $13 |
| USD/NOK | 8.35515 | 8.34970 | $650 | $390 | $260 | $130 |
| USD/SEK | 8.32098 | 8.31775 | $388 | $233 | $155 | $78 |
| Average | $318 | $191 | $127 | $64 |
As the table below indicates, hedging costs were significantly higher on May 31, due to the illiquidity, which might beg the question, if managers knew markets were going to be illiquid, why did they not hedge on the 28th like some of their brethren?
| May 31 |
| CCY Pair | WMR 4pm Fix* | Siren Fix | 100%** | 80% | 70% | 60% |
| EUR/USD | 1.22258 | 1.22168 | $737 | $442 | $295 | $147 |
| USD/JPY | 109.392 | 109.502 | $1,005 | $603 | $402 | $201 |
| GBP/USD | 1.42138 | 1.4194 | $1,395 | $837 | $558 | $279 |
| AUD/USD | 0.7740 | 0.77374 | $336 | $202 | $134 | $67 |
| USD/CAD | 1.20809 | 1.20839 | $248 | $149 | $99 | $50 |
| NZD/USD | 0.72799 | 0.72753 | $632 | $379 | $253 | $126 |
| USD/CHF | 0.89931 | 0.89964 | $367 | $220 | $147 | $73 |
| USD/NOK | 8.31655 | 8.33252 | $1,917 | $1,150 | $767 | $383 |
| USD/SEK | 8.29186 | 8.29582 | $477 | $286 | $191 | $95 |
| Average | $790 | $474 | $316 | $158 |
*According to Raidne calculation using NewChange FX data
** Savings are in dollars per million by percentage of correlation to the Fix flow. Blue cells signify a projected saving using Siren, Red cells a saving using WMR and Green no saving either way
Whilst the numbers were generally lower than at the April month-end in terms of savings by executing over a longer window (Siren measures over 20 minutes, WMR five), this can in part be explained by a splitting of the total flow across two days – May 28 and 31. That said, the USD/JPY and Cable numbers – being two of the more heavily traded markets – are quite stark, even if the flow is less heavily correlated with the direction of the Fix. As the chart below indicates, price action in Cable in particular suggested significant flows ahead of the Fix as players (pre)hedged the flow ahead of the rate set.
Every month, The Full FX is selecting a currency at random to highlight the impact of the Fix, this month the selected currency is the Hungarian forint. Again data is provided by Raidne according to the same guidelines in place for the regularly reported currencies. USD/HUF was sold down ahead of, and during, the Fix.
