What Happened at the Month-End Fix?

It’s back, but it’s slightly different!

As data from an alternative benchmark in Siren FX is unavailable, thanks to data from New Change FX, The Full FX will resume offering insight into the month-end Fix after a year away. We will be publishing three different methodologies to provide a window into the true cost of execution and market impact from fixing flows on the last day of the month.

While sources say that benchmark users are trying to spread their business over a longer period of time – namely in the days running up to the month-end rather than on the day itself – they also report notable market impact still on that day.

With this in mind, The Full FX will publish three different benchmark fixes for month-end to enable readers to compare. The first will be from New Change FX data that offers a and arrival price at 15 minutes before the opening of the WM window, as well as for the opening itself. NCFX is also providing a 20-minute TWAP up to the end of the WM window, based upon mid-market one-second snapshots. This is intended to replicate as close as possible the WM methodology of taking one second slices, hopefully providing a reliable indicator as to what the benchmark fix would be if it was extended to 20 minutes. Sources also say this better reflects the actual execution path taken by participants executing month-end fixing flows.

An approximation of the WM Fix is also provided, as used to be the case, The Full FX attempts to verify that these rates are a reasonable reflection of the published Fix rates. Finally, we are also including the BFix rates as published by Bloomberg, thus meaning there are three different methodologies for the same, very important, period for the FX market.

As was the case with our previous analysis, we are studying nine currency pairs, including two Scandis – it should be noted however, that comparisons are difficult with the previous results published using Siren FX data due to the slightly different methodology used by that firm, which involved front-loading the Fix to a degree.

In the table below “Arr 1 Mid” represents 15:42:30 London time arrival price and “Arr 2 Mid” 15:57:30 London time arrival price. The columns on the right are the difference in currency pair points, with blue representing negative market impact and red positive market impact.

* Estimates provided by market participants

** Calculated via EUR/NOK and EUR/USD

Probably the most noteworthy aspects of the October month-end were the big move in USDJPY and the price action in EURUSD. For the former, the market moved some 17 points in the pre-hedginghedging ahead of the Fix window, highlighting another aspect of the month-end – unrelated flows. While there was implied demand for dollars against the yen (and CAD and Sterling), the price action suggests there was demand for euros, as well as AUD and CHF.

Equally notable was how EURUSD actually reversed course during the WM five-minute window, with that Fix actually being below arrival price, whereas the previous 15 minutes had seen steady EUR buying.

A final aspect to stand out is how different the two USDNOK calculations are. Two separate sources confirm that the implied WM rate is close to, or at, the published WM rate, meaning there is a 115-point divergence. Again this looks to be due to the price action ahead of the WM window opening, with USD/NOK falling some 65 pips in the 15 minutes leading up to that point.

TWAP vs WM Dollars Per Million (Estimated)

Blue = TWAP providing better execution for participants trading with the overall flow

Red = WM proving better execution for participants trading with the overall flow