Exclusive: Refinitiv examines changes to major daily Forex fix

The Refinitiv logo will appear on the screen of the Canary Wharf office in London, England, on August 1, 2019. REUTERS / Toby Melville / Files

September 6, 2021

Tommy Wilkes

London (Reuters) – Refinitiv is in the industry’s concerns about a global benchmark that was valued trillions of dollars, including an extension of the trading window used to calculate it, daily Forex (FX) ) Is being considered for a series of changes, senior executives said. Of the dollar of assets.

The 27-year-old WM / R benchmark, calculated by owner Refinitiv, has a five-minute trading window called “Modify” at 4 pm on weekdays when investors and banks flood the market. By buy and sell order.

WM / R is the most popular benchmark to date and is included in contracts such as those used by US fund managers who want to sell dollars at fixed exchange rates and buy European stocks to buy euros. increase.

One of the concerns of some asset managers moving billions of dollars within the window is that more agile hedge funds could find and trade off large deals and worsen investor exchange rates. Is to have.

The FX Group, organized by the European Central Bank, is concerned that concentrating end-of-month transactions on specific FX fixeds in April 2020 “is likely to create more volatility and pressure on market functions.” Said.

Abnormal fixed price volatility was reported in 2020, when the COVID-19 pandemic increased the volatility of the currency market, and more recently on July 27, when Sterling surged with a surge in trading volume.

“We are very focused on helping (benchmarks) evolve and adapt to changing market structures,” said Shirley Barrow, Global Head of Refinitiv Benchmarks and Indexes, extending the window. It was possible, but it has not determined what is “insufficient width”.

In addition to expanding the trading window, Mr. Barrow is more representative of the $ 6.6 trillion FX market per day by procuring trading data from more than two current platforms: Refinitiv Matching, EBS and Currenex. Said that it can be.

Concerns about corrections and whether investors are getting significant deals have been around for years, but resurfaced during the pandemic, urging Refinitiv to evaluate the option.

Refinitiv began collecting data on benchmark performance last year and began asking clients for feedback on potential changes, Barrow told Reuters.

This reveals that some users want to expand their windows to address concerns, such as computer-driven algorithm traders using slow-moving asset managers.

By widening the window, large buy or sell orders can have less impact on the market due to the potential for decentralized transactions, making it difficult for algorithms, the so-called Argos, to track investor order flows. Become.

However, for some asset managers, the current system is working well and there is always a “market impact” that others can find when placing large orders over a defined period of time. , Says that lengthening the window…