What Happened at the Month-End Fix?

It was another relatively quiet month-end Fix in market impact terms, although one pair did record its highest potential saving of the year using the longer Siren FX methodology, over the shorter WM calculation window.

While the savings were largely in line with those seen in August, it should be noted that in two major pairs – Cable and USD/JPY – The Full FX has verified that the New Change FX calculation is roughly one pip away from the actual WM Fix, in both cases, this would have increased the execution cost from using the shorter WM window.

The overall saving across the portfolio of nine currency pairs was $286 per million – still a substantial saving – slightly above August, but below the 2024 average of $342 per million. Most individual pairs were offering savings from the longer 20-minute window underneath their 2024 average and further under the longer-term 42-month average since The Full FX started publishing results.

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

As noted, Cable had its highest potential saving of 2024 if users were to base their cost on the Siren FX window, with the price action exhibiting all the characteristics of a “classic” pre-hedging, or hedging ahead of the Fix, move. Indeed, it is not impossible that even the longer Siren FX window may have missed some of that hedging activity, for a dip, Sterling buying started, and was maintained, from 30 minutes out form the opening of the WM window.

The market moved more than 50 pips in that 30-minute window – it moved around 30 between the start of the Siren and WM windows – entered the WM window at or close to the high of the hour, before trading flat and then dipping twice, probably as speculators took their profit. Post-WM window, the market traded sideways for the next 30 minutes, suggesting there was large buying interest in Cable at the Fix.

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/ZAR. Data is again provided by Siren FX according to the same guidelines in place for the regularly reported currency pairs.

Although there were potentially significant savings on offer in USD/ZAR – it should be noted that $499 is significantly below the 41-month average around $1100 per million – the price action did not exhibit overly aggressive hedging ahead of the Fix, mainly thanks to a quick sell off soon after the Siren window opened.

Price action was decidedly pro-dollar, however, and the pair rose steadily for the rest of the pre-WM window, before, again, dipping once that window opened. The actual WM window saw sideways trading, although the pair exited notably lower than it entered, perhaps during a few speculators who had keyed on the early buying.