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What Are WM/Reuters Benchmark Rates?
Let me explain WM/Reuters benchmark rates directly: these are spot and forward foreign exchange rates that act as standard references for valuing portfolios and measuring performance. I remember when the WM/Reuters Closing Spot Rate service launched in 1994—it was designed to give you consistent forex rates so you can compare portfolio valuations accurately against benchmarks without worrying about currency differences.
Thomson Reuters provides these rates after acquiring the World Markets Company (WM) rate calculation business from State Street in 2016. That's the key provider you need to know.
Key Takeaways
To keep it straightforward, the WM/Reuters benchmark rates are your go-to spot and forward exchange rates for standard portfolio valuation and performance checks. Thomson Reuters took over the WM business from State Street in 2016, and the service now covers 155 closing spot currencies hourly. You get rates determined in a five-minute fix period, from 2:30 minutes before to after the fix time.
Basics of WM/Reuters Benchmark Rates
Starting from the basics, the original service offered closing spot rates for 40 currencies daily, but it's expanded to 155 spot currencies with hourly coverage. WM/Reuters also gives you historical data, plus closing rates for currency forwards and non-deliverable forwards (NDFs). Expect hourly intraday rates for spots, forwards, and NDFs.
Major equity and bond index compilers rely on these rates in their calculations, and they're used for things like settling financial derivatives. Some banks even guarantee trades at these rates for their clients—that's a service you might encounter.
How Rates Are Determined
Here's how it works: the rates are set over a five-minute fix period, from 2:30 minutes before to after the fix, usually at 4 p.m. London time. During this window, bid and offer rates from order matching systems and actual trades are captured. Since trades happen in milliseconds, it's a sample, not every single one.
From there, they calculate the median bid and offer using valid rates, then derive the mid-rate. That's the process you should understand if you're using these rates.
Importance of Rates
These rates matter because they value trillions of dollars in investments for money managers and pension funds. But keep in mind, the fixing method faced heavy scrutiny in 2013 due to allegations of trader collusion and manipulation—something to be aware of in this field.
What Is a Non-Deliverable Forward?
A non-deliverable forward (NDF) is where the buyer and seller agree on a cash settlement amount based on the difference between the contracted NDF rate and the prevailing spot rate. These are typically settled in U.S. dollars—straightforward cash deals without physical delivery.
What's the Difference Between Intraday and Interday Trading?
Intraday trading happens during normal business hours—it's basically the same as day trading, where you enter and exit positions within those hours. Interday trading means holding positions overnight after markets close. That's the distinction you need if you're trading.
How Comprehensive Are the WM/Reuters Benchmark Rates?
When Thomson Reuters acquired the business in 2016, it covered 40 currencies daily, but now it's up to 155 closing spot currencies with hourly updates. That's the level of coverage you can expect today.
The Bottom Line
In summary, WM/Reuters benchmark rates are your standard tools for performance measurement and portfolio valuation. Thomson Reuters acquired the business from State Street in 2016 and expanded it to 155 hourly-covered currencies. These can be powerful for trading, but they drew criticism in 2013 over manipulation claims. If you're unsure, talk to an experienced broker—that's my direct advice to you.
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