What Happened at the Month-End Fix?
Posted by Colin Lambert. Last updated: July 5, 2021
Aside from predictions of dollar selling at the month-end proving wrong for the second time in three months, market activity for June 30 was fairly quiet compared to recent months, something of a surprise given it was also quarter-end.
This is the third in a regular series of pieces looking at price action over the month end, London 4pm Fix, and comparing the differences between two regulated benchmark rates, WMR and Siren.
The data tables below offer a comparison with data delivered by Raidne, which owns the Siren Fix. The Full FX has independently verified that the WMR data, which is calculated from New Change FX data by Raidne, reasonably reflects the month-end rates delivered by WMR, however there are slight adjustments, to EUR/USD at at 1.1859 and USD/CAD at 1.2383, in particular, which mean the advantage of the longer window is reduced, but not eradicated, while the WMR AUD/USD Fix at 0.75075, actually meant there was a slight bias in favour of the latter, assuming the user was a seller of USD.
|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
***Table has been adjusted to reflect actual WMR Fix, however savings are estimated by The Full FX
To provide more context, the table 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”.
Although activity did seem quieter, as the table above indicates, there were still significant savings to be made by using the Siren calculation, which takes in a longer calculation window. Once again, of the majors, Cable provided a significant contrast in outcomes between the two fixes, with two distinct pieces of price action likely to be related to pre-hedging and both of which are captured by the longer window.
The first at 15.41 saw Cable sold off some 12 points before recovering, the more significant occurred in the minutes leading up the WMR Fix. Interestingly, after bottoming out early in the WMR window, Cable recovered to exit the window at roughly the same level. This suggests some speculative activity jumping on executing parties’ selling of Sterling ahead of and during the early seconds of the window.
Every month, The Full FX is selecting a currency at random to highlight the impact of the Fix, this month the selected currency is the South African rand. Again data is provided by Raidne according to the same guidelines in place for the regularly reported currencies. USD/ZAR was bought ahead of the Fix, resulting in a near one big figure and $687 per million difference between the two fixes as the pre-hedging had a significant impact on the price set.