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Fall in corporate FX activity moves emphasis away from London fix

Liquidity data from CLS has revealed unusual trading activity around the 4pm London fix – but it has more to do with corporate inertia than market manipulation.


In a bid to assess the impact of market stress on liquidity, Mosaic Smart Data, a trading analytics company, recently aggregated volume data from foreign exchange settlement firm CLS over two periods, from January 1, 2018, to February 26, 2020, and from February 27 to March 26.

The study found that FX spot transactions were up 41% in March compared with the previous month, with monthly records for EUR/USD, USD/JPY, GBP/USD, USD/CHF and USD/CAD.

However, the more interesting finding was a tendency for the liquidity curve to flatten at 4pm GMT for EUR/USD trading and for a more even distribution of GBP/USD and USD/JPY liquidity during the London afternoon trading session than would be typical.

Currencies of oil-dependent economies have also been hurt by the unprecedented fall in the price of oil - Simon Manwaring, NatWest Markets

The data showed that the response of market participants to increased volatility and stress was to be more active throughout the day rather than relying on the London fix, in a bid to control trading costs.

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