What Happened at the Month End Fix?
Posted by Colin Lambert. Last updated: August 2, 2021
This is the fourth in a regular series of pieces looking at price action over the month end, London 4pm Fix, that compare the differences between two regulated benchmark rates, WMR and Siren.
The data tables below offer a comparison with data delivered by Raidne, which owns the Siren Fix. The Full FX has independently verified that the WMR data, which is calculated from New Change FX data by Raidne, reasonably reflects the month-end rates delivered by WMR.
|CCY Pair||WMR 4pm Fix*||Siren Fix||100%**||80%||70%||60%|
*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
To provide more context, the table also presents projected dollars per million savings across a portfolio of different pairs using a correlation with the Fix calculation, depending upon how much flow was in the direction of the market, or “with the wind”.
Notably, the data for the July month end, very much reflects, at a headline level, that of June, with the overall potential savings by using the Siren Fix – which is calculated over a 20-minute window – compared to WMR’s five-minute slot being very similar. Overall, with 100% correlation to the market direction the savings per million in July were $435, compared to $429 in June. Both, while very significant, are substantially lower than the savings in the April and May month-end fixes, which suggests that the FX industry may be getting the message and either switching to a longer window, or, perhaps, executing earlier in the last week of the month.
While the headline data were very similar, where the savings were made looked quite different. Aside from Cable and USD/CAD, who are serial offenders and often see the largest market impact in the run up to the WMR window, the savings from the longer window in EUR/USD and USD/JPY were much lower.
Cable in particular, has had a couple of interesting fixing sessions leading up to the month end. As The Full FX reported last week, on July 27, the pair saw a 60-point move ahead of, and during, the WMR 4pm Fix, and for those who like their irony laid on thick, this was in the opposite direction to the month-end, suggesting, for once, there might have been some decent matches!
There are suggestions that some pre-hedging started in Cable earlier than usual, however there was general dollar buying from around 3pm London, which more likely contributed to the push lower from 1.3950. If it was indeed pre-hedging, of course, that would suggest much larger flows being executing (and pre-hedged).
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 Mexican peso. Again data is provided by Raidne according to the same guidelines in place for the regularly reported currencies. USD/MXN was caught up in the general dollar buying from just after 3pm London, and the longer Siren window saw potential savings of $385 per million.