How do we calculate interest on your trading positions?
Overnight financing (also called a swap rate for forex positions) is a small fee we charge on trading positions held overnight. This reflects the interest cost of borrowing funds to keep your position open for another day.
It is applied to positions without a set expiry date at the end of each trading day (typically around 10pm UK time and 5pm New York time).
The charge will appear in your Intertrader account order history. This will be calculated as a debit for long positions or a credit for short positions (although when interest rates are low the calculation may still work out as a debit).
The fee applies to all rolling daily spread bets and CFDs. You won’t pay the charge if you are trading futures contracts which expire on a given future date.
How is it calculated?
Our overnight financing charges are calculated using this formula:
[(Closing price / Unit exposure) x Risk per point x Applicable interest rates] / 365
Shares and indices
For long positions on shares and indices you will pay an applicable interest rate of LIBOR (London Interbank Offered Rate) + 2.5%.
For short positions on shares and indices you will be credited based on LIBOR − 2.5%. Note in the below example that the calculation still works out as a debit.
Say you’re long £1/point of the UK 100 and the index closes at 7500. You will be charged an overnight fee of £0.66 to keep this positon open.
The sum, based on a current LIBOR rate of 0.7%, is:
[(7500 / 1) x £1 x (0.7% + 2.5%)] / 365 = £0.66 debit
If you’re short the same trade then you’ll be charged an overnight fee of £0.37:
[(7500 / 1) x £1 x (0.7% − 2.5%)] / 365 = £0.37 debit
The applicable interest rate for forex trades is based on the base rates for the currencies being traded.
The interest rate if you’re long GBP/USD will be the Bank of England base rate (currently 0.75%) minus the US federal funds rate (currently 2.25%) + 1%.
If you’re shorting GBP/USD the interest rate will be the BoE base rate minus the US federal funds rate − 1%.
If you’re long £1/pip GBP/USD and the closing price is 1.3180 your overnight financing rate would be calculated like this:
[(1.3180 / 0.0001) x £1 x (0.75% − 2.25% + 1%)] / 365 = -£0.18
And if you’re short:
[(1.3180 / 0.0001) x £1 x (0.75% − 2.25% − 1%)] / 365 = -£0.90
So both these positions actually work out as credits of 18 pence and 90 pence respectively.
Central bank rates (at time of writing)
The overnight daily financing rate for spot WTI Crude and Brent Crude is 0.019% for long positions and 0.038% for short positions (at the time of writing).
Differences between spread bets and CFDs
The only difference to bear in mind is that, if you have a CFD, the charge is calculated in the market-denominated currency and then converted into your account currency.
Leaving positions open over the weekend
If you keep a non-forex position from a Friday to the following Monday we will apply overnight financing for the extra two weekend days on the Friday night.
Leaving forex positions open after a Wednesday
Financing charges will be applied for three days on forex positions left rolling from a Wednesday to Thursday. These are called ‘triple swaps’ and they exist because it takes two days for forex trades to settle. If they’re closed after a Wednesday they won’t be settled until after the weekend.
Also remember that financing charges are taken or credited straight away. Any profits and losses from your trades are realised when you close the position.
Published: 12 March 2019
You should under no circumstances consider the information and comments provided as an offer or solicitation to invest. This is not investment advice. The information provided is believed to be accurate at the date the information is produced.