What Happened at the Month-End Fix?

By historical standards it was a very quiet month end FX 4pm Fix, with the potential savings from calculating over a longer window at their lowest since The Full FX started publishing the data in April 2021. That said, at $156 per million, the longer Siren FX window still produced savings well above the level that execution experts would be comfortable with.

All nine currency pairs were well below their 40-month average, although only one pair, USD/CAD saw savings at a new low – in that case $22 per million. The largest potential savings as opposed to the five-minute WM window, were in Cable, at $358 per million, and USD/JPY at $299 per million, both pairs, obviously, see quite high volume at month-end.

Trading sources spoken to by The Full FX say that volumes were lower than usual at the Fix, but still substantial, with one or two sources suggesting that more managers are executing their hedges earlier, thanks mainly to them still not being confident in their ability to hit T+1 deadlines.

As has been highlighted recently, there remain gaps between the WM rate calculated using the higher-frequency New Change FX data and the rates published by WM. This month, in all cases bar one, USD/CHF, the actual saving would have been higher than published here. Conversely, however, and for only the second time in the 40 months of publication, the use of what sources say was the actual WM rate in USD/CHF, 0.88025, would have resulted in a net saving for those using WM.

To provide more context, the table below 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”. The Full FX verifies monthly that the WM rates used here are a reasonable reflection of that fixing.

*According to Siren FX 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

Perhaps reinforcing the sense that volumes were lower at the end of July, price action in Cable was decidedly mixed, with signs of hedging ahead of the WM window only emerging in the last 10 minutes before open.

One trading source suggests that speculators might have been caught out by the move lower some 20 minutes out from the opening of the WM window, this is often a time these traders look for signals in the market. In fact, the selling petered out after 10 minutes, to be replaced with concerted buying ahead of, and through the fixing window.

Source: Siren FX

Again, evidence the speculators were not there is found in the lack of the usual retracement towards the end of the window. Indeed, the buying continued, albeit slowly, after the WM window had closed.

Every month, The Full FX is selecting an emerging market currency pair at random, and before the data is available, to broaden the analysis – this month the selected pair is USD/CZK. Data is again provided by Siren FX according to the same guidelines in place for the regularly reported currency pairs.

Source: Siren FX

In contrast to Cable, USD/CZK highlighted a classic heading ahead of the WM Fix move, with buying starting some 20 minutes out and continuing steadily into the WM open. Interestingly, the buying during the actual window came to a halt fairly quickly, followed by the retracement into, and after, the close.

This suggests speculators may have been in operation in the emerging market pair, which moved some 10 big figures in the run up to, and in the early stages of, the WM window.