How currency fixings work
Fixing: A pre-set time of day when bids and offers are aggregated and cleared at a published price. Popular fixings are the Tokyo fixing at 00:50 GMT, “ECB fix” at 12:15 GMT and the London fixing at 16:00 GMT. Most of the volume at fixings is generated by asset managers. They have a fiduciary responsibility to get their clients the best possible execution and the thinking is the fixing price is the most transparent of the day. The benchmark price is published by the WM Company who observes the price action from 16:00 until 16:01 and sets the rate at their discretion.
What does that mean for the rest of us?
Traders can get an edge by learning which way the market is leaning at the fixings, the most important of which is the fixing at 4 pm London time each afternoon. Typically, we at ForexLive speak with our banking contacts a few minutes before the fixing to try and learn of any order imbalances.
If banks have lots of buy orders and not many sell orders, it is in their interest to push the market up in advance of the fixing, to fill the client orders at a higher price. When there are more sellers than buyers, the opposite often takes place. Having this information as the fix approaches can be quite advantageous.
