What Happened at the Month-End Fix in 2024?
Posted by Colin Lambert. Last updated: January 28, 2025
The last 12 months have seen a narrowing of the gap in terms of execution costs from using the WM London 4pm Benchmark Fix, compared to that od Siren FX, however the potential savings from using the latter’s 20-minute window, compared to the former’s five-minute span, remain significant.
Looking across the portfolio of nine currencies tracked by The Full FX, the average saving across the whole of 2024 was $319.5 per million, for an aggregated potential saving of $3,834 per million for the 12 months. This assumes that the executing party is trading with the Fix flow on all 12 occasions.
Compared to 2023, the savings are much reduced, in that year the average saving across the same nine pairs, AUD, CAD, CHF, EUR, GBP, JPY, NOK, NZD and SEK, was $575.33 per million, for a gross total of $6,904 per million for the 12 months.
The largest percentage cut in savings came in the AUD and NZD, the average saving over the year dropping 59% and 60% respectively to a still-notable $202.08.5 and $231.25 per million saving. EUR/USD also saw a significant decline in market impact, by 56% to $179.42 per million, while the two least changed were USD/CAD and USD/JPY respectively, at -11% and -13% to $$275.08 and $489 per million. Worryingly perhaps, given its place as the second biggest currency pair, USD/JPY offered the highest potential savings in dollar terms.
Sources in the industry suggest that greater awareness of the mechanics around Fix have driven a change in behaviour from some clients, something that was reinforced by the change to T+1 in North America securities markets in May. “We have seen more clients execute fixing trades ahead of month-end than we used to,” reveals a London-based banker. “They have been asking more questions about what happens on the last day of the month and some have responded accordingly.”
Another potential factor could be the rise of “guess hedging” following the T+1 switch – execution traders suggest that some funds are executing a large Fix trade based upon a best estimate of requirements at month-end, something that can be adjusted with a smaller trade at the actual month-end rate. The original trades are still executed according to policy of using a regulated benchmark, it’s just earlier in the month.
One other aspect that may be contributing to the lower market impact is the sheer success of the WM window. Bankers spoken to say they have managed to attract more flow to the 4pm window from players wishing to reduce market impact. “It has been noticeable that we are netting more off ahead of the month-end than we have for some time,” says a quant analyst at a bank in London.
As well as showing a decline from 2023, the potential savings in 2024 were also significantly below the longer-term average covering the 45 months The Full FX has been published data. Generally speaking, the 45-month average is slightly higher than that in 2024, meaning several pairs had savings discounted by around 60%. The exception, again, was USD/JPY, which was just over $100 per million cheaper in 2024 compared to the almost four-year average.
A Truer Picture?
There is one aspect of the comparison between WM and Siren that is harder to define, but analysis conducted using information provided in good faith by market participants suggests that the rates being used by The Full FX often improve the picture in favour of WM. The methodology used is for Siren FX to provide independently-derived WM rates from New Change FX data, which is sampled at a much higher frequency than that of WM.
This has led to some stark differences between the New Change FX calculation and the published WM rate – most notably in December, when USD/JPY was actually fixed a further 0.013 pips away and Cable a further two pips away. As an example, this would have meant that rather than the $295 per million saving reported by The Full FX for Cable in December, it would actually have been $455 per million.
Analysis of the year indicates that the differences between the NCFX and WM rates resulted in Cable seeing a more than six pips cumulative positive impact over the year (i.e. Using actual WM rates would have worsened the outcome for users of that methodology). Likewise, USD/JPY was mis-represented by more than five pips over the year, and EUR/USD by around 2.5 pips – all of which would have steepened the reported cost of using WM compared to Siren.
Only AUD/USD provided a negative impact – or a positive change for WM users, that by 0.1 pips, and NZD/USD and USD/CAD offered minimal changes.
Whilst the headline numbers went down in 2024, therefore, the actual impact was very likely to have been higher than reported due to the methodology used by The Full FX. That said, the $319.5 per million saving across the portfolio remains significant given the amounts being traded at the Fix.
With passive investing still growing, the chances are that volumes at 4pm in the last few days of the month will continue to increase, further raising the overall cost for investors. 2024 was a volatile year in FX markets, which may have led to increased dynamic hedging by some firms that may have used the Fix, but with 2025 likely to be as, or even more, volatile, it will be interesting to see if the trend of lower potential savings continues.