What Happened at the Month-End Fix?
Posted by Colin Lambert. Last updated: June 8, 2022
The first month-end London 4pm Fix since Refinitiv Benchmarks concluded a feedback initiative over the use of the WMR Fix provides some succour for those in favour of the status quo, providing the lowest savings across a portfolio of currencies since The Full FX started tracking results of the WMR and Siren fixes in April 2021. That said, potential savings were still $312 per million, representing a hefty market impact, albeit not on the scale of previous month. The average saving across a portfolio of currencies in the 14 months since tracking started remains a significant $728.43 per million.
Although higher potential savings were available from SEK, CAD and CHF, perhaps the most significant outcome in May was the savings on EUR/USD, being easily the most traded currency pair in the FX market a saving of $439 per million represents a significant difference, albeit, again under half the average since tracking started ($750.29).
Even at 60% correlation to the fixing flow, savings on EUR/USD were $88 per million and to provide more context, the table 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 results are calculated accordingly.
|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
The price action in EUR/USD was unusual for the month-end Fix in that what would normally be seen as the (pre) hedging window saw two way moves. From what is normally seen as the start of that window around 15 minutes before the Fix there was steady buying of EUR, however some five minutes before this was reversed and the market dropped some 30 points, before recommencing the buying trend through the window and beyond.
It should be observed that markets are generally more volatile currently and that the pullback could have been the result of new flow entering the market or nervous speculators on the Fix bailing out early – a good move if they did so in the 1.0720s.
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 Raidne according to the same guidelines in place for the regularly reported currency pairs.
As was the case with the major currencies, this month’s emerging market pick also saw diluted savings, with USD/ZAR seeing selling pressure in the hour leading up to the Fix, before recovering after. Savings of $205 per million are the second lowest since tracking started with the May 2021 Fix and significantly below the average emerging market savings of $1,002.46 across the selected month pair.