LSEG’s (London Stock Exchange Group) FXall trading platform rolled out a new service earlier this year called Forward First Fixing (FFF), a move which will allow FX benchmark fixing algo users to secure their most competitive forward points ahead of the fixing window. According to Commerzbank, who are one of the first banks to go live with this service, the new approach will significantly reduce cost uncertainty for algo clients when settling a benchmark fixing trade on a non-spot date. “Currently, if algo clients want to execute against a benchmark fixing with the delivery on a non-spot tenor, they would have to bear the risk on the forward point until after the spot fixing order is filled”, says Tibor Gergely, Head of e-FX Liquidity Provision at Commerzbank. “Depending on the currency pair and maturity, fees charged by banks for the spot benchmark fixing can be dwarfed by the bid-offer spread on the FX Swap. The overall cost of the complete transaction being dominated by the FX Swap bid-offer, it makes a lot of sense to seek the best price for the forward points ahead of the execution of the spot benchmark fixing. For any customer needing to settle a benchmark fixing trade on a non-spot date, FXall’s FFF eliminates the cost uncertainty associated with the roll from spot to another date by setting it ahead of the benchmark fixing window,” adds Gergely.
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