Hedge before the fix to avoid predatory traders – research
In simulations, slow and steady hedging for 4pm benchmark orders shaved up to 25% from costs
It’s a known but unproven assumption that predatory trading during the 4pm London time fixing window for benchmark currency rates – mostly from high-speed hedge funds and prop desks – can lead to worse prices for clients. What’s less clear is what to do about it.
A new paper, jointly authored by Deutsche Bank’s Roel Oomen and academics Johannes Muhle-Karbe and Mateo Rodríguez Polo, offers an answer.
The researchers modelled the impact of ‘opportunistic’ trading around the 4pm WM/R fixing window to
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