WM/Reuters Benchmark Rates
What are WM/Reuters Benchmark Rates
WM/Reuters FX benchmark rates are spot and forward foreign exchange rates that are utilized as standard rates for portfolio valuation and performance measurement. The WM/Reuters Closing Spot Rate service was acquainted in 1994 with give standard forex rates that would empower portfolio valuations to be compared all the more accurately against one another and financial benchmarks, without representing currency differentials.
The WM/Reuters FX benchmark rates are given by Thomson Reuters, which acquired the rate calculation business of the World Markets Company (WM) from State Street in 2016.
Rudiments of WM/Reuters Benchmark Rates
The original WM/Reuters service gave closing spot rates to 40 currencies daily. The service takes care of since expanded to 155 closing spot currencies on an hourly basis. Likewise, WM/Reuters additionally gives closing rates to currency forwards and non-deliverable forwards (NDF) hourly intraday for spot, forward and NDF rates, as well as historical data.
While most major equity and bond index compilers utilize the WM/Reuters benchmark rates in their calculations, the rates are additionally utilized for different purposes, for example, computing benchmark rates for the settlement of financial derivatives. A banks likewise offer a support to their clients by giving a guarantee to trade at the WM/Reuters rates.
Key Takeaway
- The WM/Reuters Benchmark rates are spot and forward exchange rates utilized as standard rates for portfolio valuation and performance measurement.
How Rates are Determined
The WM/Reuters benchmark not entirely set in stone more than a five-minute fix period, from 2 minutes 30 seconds before to 2 minutes 30 seconds after the hour of the fix, which is generally 4 p.m. in London. During this five-minute window, bid and offer rates from the order matching system and genuine trades executed are caught. Since trades happen in milliseconds, just a sample is caught, as opposed to each trade. The median bid and offer are calculated utilizing substantial rates over the fix period, and the mid-rate is then calculated from them.
The significance of these rates lies in the way that they are utilized to value trillions of dollars in investments held by money managers and pension funds. In 2013, the method of fixing the WM/Benchmark rates went under serious examination, after far and wide claims of collusion and rate manipulation by traders surfaced.
