Rollover & Financing

What is rollover?

In the forex (FX) market, rollover is the process of extending the settlement date of an open position. In most currency trades, a trader is required to take delivery of the currency two days after the transaction date. However, by rolling over the position – simultaneously closing the existing position at the daily close rate and re-entering at the new opening rate the next trading day – the trader artificially extends the settlement period by one day.

Rollover examples?

Every currency you buy or sell has a certain overnight interest rate associated with it. The interest amount varies based on the interest rate differential between the two currencies you are buying and selling, and fluctuates day to day with the movement of prices. These rollover rates or swap rates are determined at the interbank level based on money market rates. This process applies to CFDs and are referred to as financing charges, and based on similar lending rates.

For example, on any given day, the rollover can be $0.26 per lot for GBP/USD and $0.80 per lot for EUR/USD. Rollover fees are available in the forex calculator based on the trade size and number of holding days. For day traders that never hold a position overnight through 17:00 New York Time, rollover will not affect trading, as no rollover charges will be applied if no trades are open (held past 4:59:59) during that time.

17:00 New York Time, funds are automatically subtracted or added to accounts with open positions because of the automatic rollover.

Important Note: For positions that are open on Wednesday and held overnight, the amount added or subtracted to an account as a result of rolling over a position tends to be around three times the usual amount. This “3- Day” rollover accounts for settlement of trades through the weekend period.

For your convenience, we have included a Trade Calculator within our AlphaTrader platform which will show rollover financing fees incurred for any given rollover day(s).

What are rollover premiums & cost of carry?

Financing is applicable to spot (cash) positions held overnight. With Forex financing, if the first named currency has a higher interest rate, then you are typically credited the financing for having a long position and debited for having a short position. Likewise, if the first named currency has a lower interest rate (then the second named currency in the pair), then you are normally debited financing for holding a long position and credited for having a short position.

When are financing fees charged?

Financing fees are charged daily, excluding holidays and weekends when the Forex market is closed. In such circumstances, weekend financing is applied for three days on the same day.

For Example, Forex settlement is normally T+2 and the three day financing is applied on Wednesday. USD/CAD is T+1, however, with three days applied Thursday.

How can I view my rollover transactions?

Rollover transactions for current and historical orders can be viewed and printed within the, “Financial Transactions” window located within the WWM trading platform.

To view Rollover Transactions:

  1. In the top toolbar, click “Views” -> “Financial Transactions”. The “Financial Transactions” window will appear.
  2. From the “Financial Transactions” window, a report can be compiled for any available date range of account history.

When is rollover booked?

Conventionally, 17:00 New York Time is considered the end of the international trading day, so when you hold open positions through 17:00 New York Time you have technically held them overnight. As a service to our clients, positions are automatically rolled over every day at 17:00 New York Time to prevent physical settlement. When rolling positions overnight, rollover interest is either added or subtracted from your account.

How do you calculate rollover financing?

The calculation for rollover financing is as follows: C x (I +/- F) / Y x D

Rollover Financing Formula = C x (I +/- F) / Y x D, WHERE:

  • C = Quantity of 1st currency
  • I = Differential in interest rates between 1st and 2nd named currencies
  • F = Premium charged by WWM
  • Y = 360, with adjustments made for AUD and GBP markets with 365 days
  • D = Numbers of days to charge interest