The fixing is an economic system that can have two meanings. The first of them is related to stock markets. It is a trading system for securities with little liquidity. But it can also be a system of exchanging one currency in relation to the others. The official fixing is published by the central banks, and is used as a reference in the operations carried out in the Forex market.
Fixing characteristics
It is important to know the characteristics of each system, since in the economic sector this operation is used frequently. Next we will explain the two fixing methods so that everything is clearer.
- First, we have said that this system is used as a method of stock trading. This means trading less liquid securities. All this is done at single prices and in two daily auctions (opening and closing). During this period and in real time, a price is calculated that is balanced between supply and demand. When this time is up, a decision is made. A price is set and negotiations of the securities are carried out. But they are not done until the two auctions are finished and the highest price is obtained, since that is the objective. In short, the fixing is used to set the value of a share according to supply and demand.
- Second, we have said that this mechanism was used in the foreign exchange market. It is the system that determines the price of each currency, and it is a daily procedure that most of the banks in charge of controlling the different foreign exchange. The price obtained will mark all the guidelines for international operations.
Then, depending on the action we want to perform, we will choose one fixing or another.