WM/Reuters Benchmark Rates

AAA

DEFINITION of 'WM/Reuters Benchmark Rates '

Spot and forward foreign exchange rates that are used as standard rates for portfolio valuation and performance measurement. The WM/Reuters benchmark rates are provided by State Street subsidiary the WM Company and Thomson Reuters. The WM/Reuters Closing Spot Rate service was introduced in 1994 to prove standard forex rates that would enable portfolio valuations to be compared more accurately against each other and financial benchmarks, without having to account for currency differentials.

INVESTOPEDIA EXPLAINS 'WM/Reuters Benchmark Rates '

The original WM/Reuters service provided closing spot rates for 40 currencies daily; the service has since expanded to 159 closing spot currencies covered on an hourly basis. In addition, WM/Reuters also provides closing rates for 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 use the WM/Reuters benchmark rates in their calculations, the rates are also used for other purposes such as benchmark rates for the settlement of financial derivatives. Some banks also provide a service to their clients by providing a guarantee to trade at the WM/Reuters rates.

The WM/Reuters benchmark rates are determined over a one-minute fix period, from 30 seconds before to 30 seconds after the time of the fix, which is generally 4 pm in London. During this one-minute window, bid and offer rates from the order matching system and actual trades executed are captured. Since trades occur in milliseconds, only a sample is captured, rather than every trade. The median bid and offer are calculated using valid rates over the fix period, and the mid-rate is then calculated from them.

The importance of these rates lies in the fact that they are used to value trillions of dollars in investments held by money managers and pension funds. In 2013, the method of fixing the WM/Benchmark rates came under intense scrutiny, after widespread allegations of collusion and rate manipulation by traders surfaced.

RELATED TERMS
  1. Managed Currency

    Any currency that can have its exchange rate affected by the ...
  2. Middle Rate

    A term used to describe the average rate agreed upon when conducting ...
  3. London Spot Fix

    A price per ounce for each of the precious metals (gold, silver, ...
  4. Real Time Forex Trading

    A form of speculation in which a trader bets on the movement ...
  5. Forex Spot Rate

    The current exchange rate at which a currency pair can be bought ...
  6. Steve Cohen

    A trading magnate also referred to as the Hedge Fund King and ...
Related Articles
  1. Economics

    Understanding Money Supply

    Money supply – also called money stock -- refers to the total amount of currency and other liquid financial products in an economy at a particular time.
  2. Forex

    The Worst Performing Currencies Of 2015

    The U.S. dollar has strengthened over the past year while weakness in Europe and the former Soviet Union has led to declines in those currencies.
  3. Economics

    What is Fiat Money?

    Fiat money is currency that a government has declared to be legal tender, but is not backed by a physical commodity.
  4. Economics

    What is M1?

    M1 is a measurement of money supply that includes all hard currency, plus demand deposits such as checking accounts.
  5. Forex

    Best Places To Go On A Strong Dollar In 2015

    The U.S. dollar is stronger than ever, which means that traveling abroad to certain countries will be easier on the wallet.
  6. Forex

    Is The Swiss Franc A Safe Haven?

    We examine when and why there are runs on Swiss francs.
  7. Forex

    Understanding Currency Carry Trade

    A currency carry trade is a long-term investment strategy used primarily by large institutional investors. The purpose is to make a profit over time from differences in interest rates between ...
  8. Economics

    Could Ukraine's Debt Crisis Destabilize The EU?

    A financial crisis in Ukraine could be a bigger threat to European security than the current financial crisis in Greece.
  9. Chart Advisor

    Why You Must Watch These Currency ETF Trade Levels

    Major currencies have been pushed lower on U.S. dollar strength. Here are trade setups for if the trend continues, or reverses.
  10. Investing

    The Best Way To Approach The Currency Hedge

    Currency is going to continue to be an important factor in investment choices, particularly as the dollar strengthens.

You May Also Like

Hot Definitions
  1. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  2. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  3. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  4. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  5. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  6. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
Trading Center