| NEW YORK
NEW YORK Dec 12 Integral Development Corp, a
technology provider for the foreign exchange market, plans a
January launch of a second-by-second FX benchmark for major
currency pairs, at a time when allegations of rate manipulation
have tarnished the reputation of widely used currency
Integral, based in Palo Alto, California, and Stanford
University have collaborated to develop once-a-second benchmark
rates called Integral FX Benchmark (FXB). The rates are based on
data from Integral's liquidity aggregation and over-the-counter
FX trading network.
The company runs the cloud-based, "FX Grid" network, a
multi-sided trading network used by hundreds of FX
over-the-counter global exchanges.
"By publishing this benchmark on a second-by-second basis,
you might consider it a continuous fixing," Harpal Sandhu,
Integral's president said in an interview.
"The difference between having a fixing which everybody
knows is going to take place at a certain time, versus something
that is happening continuously is a sea change in transparency
for the true users of foreign exchange which is the buy-side
The most commonly used benchmarks are calculated by
WM/Reuters, a joint venture of The WM Co and Thomson Reuters
Corp. However, financial regulators in several
countries, including the United States, Switzerland and UK have
been investigating rate-rigging allegations in forex markets.
Foreign exchange currently has no source of reference rates
that allow investors and traders to benchmark their executions
on a continuous basis. The existing fixing rates are calculated
infrequently and are not universally available.
The popular WM/Reuters fixes include those at 4 p.m. or 8
p.m. London, times that trading operations are transferred from
one global region to another. About $4 trillion in assets are
tied to the fix, which is used to value portfolios.
Sandhu said Integral's benchmark can ultimately replace the
WM Fix, but it can also be used for other purposes such as
transaction cost analysis. Prices are evaluated to determine
whether the trades were executed at favorable prices - low
prices for purchases and high prices for sales.
"Implementing a transaction cost model in FX has always been
challenging due to a lack of intra-daily benchmark rates," said
Michael Melvin, managing director and senior research adviser at
BlackRock in San Francisco.
"Even if one had a historical data set to allow model
estimation, the challenge has been to have a proper continuous
exchange rate series that supports trade evaluation on an
Integral FX Benchmark Rates will be available for download
each day after the close of trading in New York free of charge,
initially for AUD/USD, EUR/USD, GBP/USD, NZD/USD, USD/CAD,
USD/CHF and USD/JPY. The service will commence on Jan. 15, 2014.