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To fix or not to fix, the Fix: Reassessing the effectiveness of the 4 pm Fix. A pre-registered study

Author

Listed:
  • Benenchia, Matteo
  • Galati, Luca
  • Lepone, Andrew

Abstract

This study critically re-evaluates the effectiveness of the WM/Refinitiv (WMR) methodology for Foreign Exchange (FX) benchmark rates following its revision in 2015. Through the use of proprietary high-frequency trading data provided by Refinitiv, the research assesses the representativeness, attainability, and robustness of the WMR 4 pm fix. The study examines the benchmark’s ability to accurately reflect market conditions and the implications of potential methodological enhancements, such as extending the calculation window. Findings indicate that while limited improvements in robustness can be achieved with longer windows, the current 5-min window remains broadly effective. However, the increased complexity and cost of changing the length of the window could outweigh the benefits. Additional results underscore the need for ongoing adaptation to evolving market dynamics and provide critical insights for financial institutions, regulators, and central banks in maintaining reliable and manipulation-resistant benchmarks.

Suggested Citation

  • Benenchia, Matteo & Galati, Luca & Lepone, Andrew, 2025. "To fix or not to fix, the Fix: Reassessing the effectiveness of the 4 pm Fix. A pre-registered study," Pacific-Basin Finance Journal, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:pacfin:v:93:y:2025:i:c:s0927538x24004049
    DOI: 10.1016/j.pacfin.2024.102652
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    References listed on IDEAS

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    1. Angelo Aspris & Sean Foley & Peter O'Neill, 2020. "Benchmarks in the spotlight: The impact on exchange traded markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(11), pages 1691-1710, November.
    2. Benenchia, Matteo & Galati, Luca & Lepone, Andrew, 2024. "To fix or not to fix: The representativeness of the WM/R methodology that underpins the FX benchmark rates. A pre-registered report," Pacific-Basin Finance Journal, Elsevier, vol. 84(C).
    3. Chiang, Thomas C. & Jeon, Bang Nam & Li, Huimin, 2007. "Dynamic correlation analysis of financial contagion: Evidence from Asian markets," Journal of International Money and Finance, Elsevier, vol. 26(7), pages 1206-1228, November.
    4. Galati, Luca, 2024. "Exchange market share, market makers, and murky behavior: The impact of no-fee trading on cryptocurrency market quality," Journal of Banking & Finance, Elsevier, vol. 165(C).
    5. Melvin, Michael & Prins, John, 2015. "Equity hedging and exchange rates at the London 4p.m. fix," Journal of Financial Markets, Elsevier, vol. 22(C), pages 50-72.
    6. Martin D. D. Evans & Peter O'Neill & Dagfinn Rime & Jo Saakvitne, 2018. "Fixing the Fix? Assessing the Effectiveness of the 4pm Fix Benchmark," Working Papers gueconwpa~18-18-18, Georgetown University, Department of Economics.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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