WM/Reuters

WM/Reuters
Name	WM/Reuters
Type	Benchmark rate
Industry	Financial services
Founded	1988
Headquarters	London
Area served	Global

WM/Reuters is a benchmark process that provided widely used foreign exchange and reference rate panels for institutions, custodians, and asset managers. It combined the WM Company’s administration with Reuters’ data and distribution, producing daily reference rates used in valuation, performance measurement, and compliance across international markets. The rates influenced custodian banks, hedge funds, insurance firms, and central banks involved in cross-border holdings and portfolio accounting.

Background and development

The benchmark emerged from collaborations among the WM Company, Reuters Group, BBA-era market infrastructure, and later entities like Thomson Reuters and Refinitiv. Its evolution paralleled reforms after events involving the Bank of England interventions, the Federal Reserve System policy shifts, and the rise of electronic trading platforms such as EBS and Currenex. Industry players including State Street, Bank of New York Mellon, Northern Trust, Deutsche Bank, J.P. Morgan, and Goldman Sachs contributed to operational specifications and adoption. Regulatory interest from authorities like the Financial Conduct Authority and the U.S. Department of Justice shaped procedural changes following benchmarks controversies affecting Libor and other reference rates. Developments in market data aggregation mirrored trends in Bloomberg L.P., Morningstar, Inc., and S&P Global product offerings.

Methodology and calculation

The methodology combined transaction and quote aggregation from electronic platforms such as EBS, Reuters Matching, and broker screens maintained by firms like ICAP and TP ICAP. Calculation windows coincided with global trading hours influenced by time zones across London, New York City, Tokyo, and Singapore. Inputs included executable trades from liquidity providers like Citigroup, Barclays, HSBC, and UBS. Technical safeguards echoed practices in benchmark-setting frameworks developed after reviews by the International Organization of Securities Commissions and guidance from the Basel Committee on Banking Supervision. Data normalization procedures resembled practices used by ICE benchmarks and CME Group clearing references to reduce outliers and ensure comparability.

Market participants and usage

Major custodians including State Street Corporation, BNY Mellon, and Northern Trust Corporation used the rates for valuing cross-border equity and fixed-income portfolios. Asset managers such as BlackRock, Vanguard, Fidelity Investments, and hedge funds like Bridgewater Associates used them in performance attribution and risk reporting. Pension schemes, sovereign wealth funds such as the Government Pension Fund of Norway, and insurers including Prudential plc and AXA relied on the published rates for accounting under standards like those promulgated by the International Accounting Standards Board. Clearinghouses and exchanges such as LCH and Euronext integrated reference snapshots for margining and settlement processes.

Governance and oversight

Oversight arrangements involved administrators, contributors, and third-party auditors with governance influenced by standards set by the Financial Stability Board and the European Securities and Markets Authority. Internal governance drew on practices from multinational firms like Deloitte, KPMG, PwC, and Ernst & Young for assurance and compliance. Legal frameworks intersected with statutes enforced by the Financial Conduct Authority and U.S. Securities and Exchange Commission, and cross-border coordination referenced memoranda among central banks including the Bank for International Settlements and the Federal Reserve Bank of New York.

Criticisms and controversies

Critics compared issues faced by WM/Reuters with scandals surrounding Libor and raised concerns paralleling cases investigated by the U.S. Department of Justice and the Competition and Markets Authority. Allegations included potential conflicts of interest among contributor banks such as HSBC and Barclays, and scrutiny over the transparency of inputs from market-makers like Deutsche Bank and J.P. Morgan Chase. Academic commentators at institutions like London School of Economics and Harvard University examined model risk, while think tanks including Chatham House and Brookings Institution discussed systemic implications. Reforms proposed by panels involving representatives from International Monetary Fund and Organisation for Economic Co-operation and Development aimed to strengthen audit trails and contributor validation.

Impact on financial markets

WM/Reuters rates influenced foreign exchange valuation, cross-border fund reporting, and liquidity provisioning across major currency pairs involving U.S. dollar, euro, Japanese yen, British pound sterling, and Swiss franc. Asset valuation changes affected corporate treasuries at firms like Apple Inc., General Electric, and Toyota Motor Corporation when translating foreign holdings. Hedge funds and proprietary traders at firms including Two Sigma and Citadel LLC used benchmark snapshots for arbitrage and portfolio rebalancing. Central banks including the European Central Bank, Bank of Japan, and People's Bank of China monitored reference rates for market functioning indicators, while sovereigns and multinationals relied on them for balance sheet reporting under standards from the International Financial Reporting Standards Foundation.

Category:Financial benchmarks