4pm Fix Back in the Spotlight as Cable Soars
Posted by Colin Lambert. Last updated: July 29, 2021
Price action around the London 4pm Fix grabbed traders’ attention again on 27 July as Cable saw a 60-point move ahead of, and during, the fixing window.
Dealing sources say the buying started around 3.45pm London time, a point at which pre-hedging (or hedging) of Fix flow often begins, at which point Cable was 1.3825. It rose quickly to trade above 1.3860 as the calculation window opened, before continuing its rise to a high of 1.3886 as the window closed.
The move follows a similar event in EUR/SEK just before the last month end, when a large order was executed on behalf of a customer at, and before the Fix, that saw the Swedish kroner weaken by about 0.5%. Coincidentally enough, Cable rose by almost that amount during the latest episode.
To give some perspective on the impact of the activity on the Fix, data provided by Raidne, owner of the Siren benchmark Fix that uses a 20-minute calculation window (and a slightly different methodology), suggests potential savings of nearly $2,000 per million by using a longer window.
Using New Change FX data, Raidne estimates the WMR 4pm Fix at 1.3882, whereas the Siren Fix was 1.38552, a saving of $1,925 per million. With sources suggesting the order size was in excess of GBP 1 billion, the “cost” of calculating over the shorter window could be in excess of $2.6 million.
Dealing sources suggest the trading may have been a client hedging month-end flows early, if so this can only heighten expectations ahead of 30 July, when the majority of flow is hedged at the Fix. The sources add the order may have taken the market by surprise, as there was little speculative activity normally associated with month-end flows, and there was no reversion after the window closed.