fx market behaviour during the wm/r fixing window, 2015–2019€¦ · nov 24th 2015 - feb 13th...

FX Market Behaviour during the WM/R Fixing Window, 2015–2019Global Foreign Exchange Committee (GFXC)Sydney, December 2019

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We have been tracking activity on Matching during the WM/R window since 2014

• Levels of activity before, during and after the window

• Distribution of trading activity within the window

• Changes in spreads within the window

• Size of market movement during the fixing period

• Predictability of market direction after the window opens

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Average Amount Traded GBP/USD at 15s Intervals Around 4pm WM/R fix (in £GBP) Nov 24th 2014-Feb 13th 2015

Prior to February 2015, GBP volumes peaked during the window, and there was an increase in volumes ahead of the window

Average Amount Traded GBP/USD at 30s Intervals Around 4pm WM/R fix(in £GBP) Nov 24th 2014-Feb 13th 2015

15:59:30 – 16:00:30

15:00:00 16:10:00

15:55:00 16:05:00

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Switch to the 5 minute window led to reduced trading ahead of the window

Left:Average quantity executed on gbp/usd in 15s slices from 3.30pm to 4.30pm London time

Y-axes have same scale per graph

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Switch to the 5 minute window led to reduced trading ahead of the window(expanded view)

Left:Average quantity executed on gbp/usd in 15s slices from 3.30pm to 4.30pm London time


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AUD behaviour is similar

Left:Average quantity executed on aud/usd in 15s slices from 3.30pm to 4.30pm London time


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Left:Average quantity executed on usd/cad in 15s slices from 3.30pm to 4.30pm London time


CAD behaviour is similar

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Prior to February 2015, trading activity was highest in the first part of window

0%

5%

10%

15%

20%

25%

30%

35%

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

AUD/USD Volume During Quartiles of Fixing Window, 24 Nov 2014 – 13 Feb 2015

0%

5%

10%

15%

20%

25%

30%

35%

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

GBP/USD Volume During Quartiles of Fixing Window, 24 Nov 2014 – 13 Feb 2015

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In GBP, volume became more evenly distributed after lengthening the window, but has recently been reverting back to a steeper profile

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The behavior in AUD and CAD is similar, but has remained flatter

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0.00

1.00

2.00

3.00

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5.00

Average GBP/USD Spread (pips) at 15s Intervals Around 4pm WM/R fix Nov 24th 2015 - Feb 13th 2015

0.00

0.50

1.00

1.50

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2.50

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3.50

Average AUD/USD Spread (pips) at 15s Intervals Around 4pm WM/R fix Nov 24th 2015 - Feb 13th 2015

Prior to February 2015, spreads tightened during the window

15:00:00 16:10:00

15:59:30 – 16:00:3015:00:00 16:10:00

26% decrease in spread from 1.95

to 1.45 pips

20% decrease in spread from 3.08

to 2.46 pips

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GBP spreads continue to tighten during the benchmark window

Spreads at 15s intervals from 3.15pm to 4.15pm London time on gbp/usd

X-axis 15s slices before and after 4pm

24% spread compression

21%

26%

22%

20%

27%

26%

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Spreads at 15s intervals from 3.15pm to 4.15pm London time on aud/usd



19%

13%

17%

19%

22%

25%

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Spreads at 15s intervals from 3.15pm to 4.15pm London time on usd/cad



20%

20%

23%

23%

35%

25%

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Prior to February 2015, large quantities of GBP could be executed with minimal market impact compared to other times of day

Note: 1 min periods outside fix taken from London hours, 8am-5pm. Data from Nov 24th 2014 to Feb 13th 2015

0

0.002

0.004

0.006

0.008

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0.012

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pric

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low

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Quantity traded on Matching

1m period outside fix 1m fixing window Linear (1m period outside fix) Linear (1m fixing window)

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Large amounts can still be executed in GBP during the window with lower market impact than at other times of day

X-axis: quantities traded in each 1 min or 5min period

Y-axis: trading range for 1 min or 5 minute period

Orange: during fixBlue: 1 or 5 minute periods during 8am-5pm London time where >25mio executed and outside fix

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Does market direction in the first quartile predict market direction over the remainder of the window?

Positively predictive: upward move in first quarter of fix predicts upward move in remaining three quarters

Negatively predictive: upward move in first quarter of fix predicts downward move in remaining three quarters

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How well does the VWAP of trades during the 4pm benchmark window correlate to the VWAP for the day?

The chart shows the difference between the VWAP of all trades during the 4pm benchmark window and the VWAP of all other trades in the day for GBP

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0.0300

GBP

2011 2012 2013 2014 2015 2016 2017 2018 2019

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-0.0100

-0.0050

0.0000

0.0050

0.0100

CAD

How well does the VWAP of trades during the 4pm benchmark window correlate to the VWAP for the day?

The chart shows the difference between the VWAP of all trades during the 4pm benchmark window and the VWAP of all other trades in the day for AUD and CAD

2011 2012 2013 2014 2015 2016 2017 2018 2019

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AUD

fx market behaviour during the wm/r fixing window, 2015–2019€¦ · nov 24th 2015 - feb 13th...

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