The London session

When the session runs 

The London session is a description of when people are at their desks, not a rule about when trading is permitted. Currencies trade continuously through the working week, and no authority declares the session open or closed. The bracket in general use runs from the start of the European business day to the end of the London afternoon, and different vendors and desks draw it slightly differently at both ends. None of them is wrong, because there is no body with the standing to be wrong about it.

The conversion has one moving part and one fixed one. Gulf Standard Time never changes: it holds the same offset from Coordinated Universal Time in January and in July. Britain does change, moving to summer time in the spring and back in the autumn. The session therefore appears to shift by an hour twice a year when read from a desk in the UAE, while it has not moved at all from a desk in London. The table below sets out both cases, anchored to UTC for the reason server clocks are anchored to it: it is the only clock in the calculation that never adjusts.

Why the activity concentrates here 

Three separate things overlap in these hours, and the concentration is the sum of them rather than any one on its own.

The first is position on the clock. London's working day begins while Asian desks are still finishing theirs and ends after North American desks have started, so a London dealer can transact with counterparties on both sides of the world without waiting for a night to pass. No other financial centre sits in that position. A desk in Tokyo cannot reach New York inside its own working day at all, and a desk in New York meets Europe only in its morning.

The second is that these are the home hours of three heavily traded currencies. The euro, sterling and the Swiss franc are quoted during the working day of the economies that issue them, which is when the real commercial demand for them exists. European exporters and importers settle invoices, corporate treasuries hedge, fund managers move money in and out of European assets, and central banks in the region publish their decisions. Every one of those activities produces a currency transaction, and they are clustered into the same window because the institutions producing them all keep European office hours.

The third is inherited infrastructure. London has been the centre of the international foreign exchange market for a very long time, and the dealing rooms, the broking and the settlement plumbing all built up around that fact. Banks headquartered elsewhere run large parts of their currency books from London, including books in currencies with no European connection at all. Concentration of this kind is self reinforcing: a participant wanting to deal in size goes where the other participants already are, which is what keeps them there.

What depth does to the spread 

A quoted spread is the distance between the best price at which somebody is currently willing to buy an instrument and the best price at which somebody is currently willing to sell it. Every additional participant who quotes does one of two things to that pair. Either the quote betters the best one already showing, in which case the distance between the two narrows, or it does not, in which case it joins the queue behind and adds to the size available at that level. Adding participants therefore either tightens the spread or deepens the book, and across a session with a great many of them it tends to do both.

The market structure module described how an order works through the levels of a book when it is larger than the size resting at the top. The session is one of the variables inside that description: the same order, in the same instrument, meets a different quantity of resting size depending on how many participants are quoting when it arrives. That is why execution quality and session hours are discussed together rather than separately.

The cost consequence is arithmetic, and it is worth seeing as a number. Crossing the spread is a cost paid on entry and again on exit, and it scales with position size, so a difference of a fraction of a pip is a real amount of money on a full sized position.

Depth and movement are different quantities 

A common misreading treats a deep market as a calm one. The two are not the same measurement. Depth describes how much size is resting close to the current price. Movement describes how far the price travels over a period. They are independent enough that a session can be at its deepest and at its most active in the same hour, and the London session is conventionally described as exactly that: the tightest hours of the day to transact in and the widest range of the day, at once.

The reason is that the events sit inside the hours. Euro area and United Kingdom economic releases are published on European mornings. European central bank communication lands in the same window. European cash equity markets hold their opening auctions inside it, and the North American session begins before it ends. A session defined by having the most participants present is also, by construction, the session into which the most scheduled information is released.

One scheduled event inside the session is worth naming, because it is a mechanism rather than a habit. A fixing is a benchmark exchange rate calculated from actual trading over a short defined window and published as the reference rate for that day. Index providers, fund administrators and custodians use fixings to value portfolios and to settle transactions agreed in advance, so a quantity of business is deliberately timed into that window rather than executed at a moment of anyone's choosing. Traders describe the volume around a fixing as concentrated for that reason. The description is of the mechanism, and it says nothing about what any particular fixing will do.

What else opens in these hours 

Currencies are the reason the session is discussed, but they are not the only thing that changes state when Europe arrives. Several instrument types move from dormant to live inside the same bracket.

• European cash equity markets. London, Frankfurt, Paris, Amsterdam, Milan and Zurich hold their opening auctions within the first part of the session, and their listed shares are only tradable in their own market hours.
• Index CFDs written on European benchmarks. The contract quotes for far longer than its underlying market is open, so for part of the day the quote reflects futures and expectations rather than trading in the constituent shares themselves.
• Shares CFDs on European listings, which inherit the trading calendar of the exchange the share is listed on, including its public holidays.
• Precious metals. The London market is the historic centre of the physical gold and silver trade, and its afternoon benchmark price is set inside these hours.
• European government bond and energy markets, whose own trading is concentrated into the same European working day.

The second item causes the most confusion and is worth stating plainly. A CFD written on a European index has a price outside European hours, but the shares in that index are not trading then, so the quote is derived from the related futures market and from whatever happened elsewhere in the world overnight. When the cash market opens, the constituent shares begin trading and the index reflects them directly. That transition is what a session open means for an index instrument. The instruments in each class are listed across the markets pages.

Where practitioners disagree 

The first disagreement is about whether the opening hour is structurally special. One tradition treats it as a defined event with its own conventions, on the reasoning that a mass arrival of participants repositioning at the same time is a genuine structural feature rather than a coincidence. Another points out that session descriptions are averages taken over many days, that any individual day departs from an average freely, and that a convention published in every introductory text is known to everybody watching the same instrument, which is not the usual condition for something remaining distinctive. Both traditions are describing the same hours and neither has produced a settlement.

The second concerns cost. One argument holds that the deepest hours are the cheapest to transact in, since the quoted spread is at its narrowest and an order of a given size consumes fewer levels of the book. The counter argument is that the spread is only one component of the cost of transacting, and that the other, the distance the price moves while an order is being worked, is larger in precisely those hours for the same reason the spread is smaller. Both measure something real, they measure different things, and which dominates depends on the size of the order and the instrument.

A third point is less a disagreement than a definitional untidiness. Because the session has no formal boundary, published brackets differ at each end, and some desks treat it as finishing when the afternoon fixing has cleared rather than at a clock time at all. Any comparison of session statistics from two sources is a comparison of two slightly different definitions unless both brackets are stated.