In the spot Forex market, 5 pm EST marks the End of Day for all currency pairs. Once the new day begins, all trade dates and settlement dates shift to the next valid date. Subsequently, open trades held through end of day will be rolled over to the next valid trade/settlement date.
Rollover involves exchanging the expiring position for a position expiring the following settlement date. WorldWideMarkets automatically rolls over all open positions at the end of each day. Funds are either subtracted from or added to accounts depending on interest rate differentials and the trader’s position in the market.
If a trader is long the currency bearing the higher interest rate, the position “being sold” is worth more than the position being acquired, thus you would earn interest. The reverse is also true; if a trader is short the currency bearing the higher interest rate, the trader is acquiring a position worth more than the one “being sold”, thus you would pay the interest. The interest amount varies based on the currency pair, the interest rate differential between the two countries, and can fluctuate day to day.
The rates of interest that will be applied to a trade opened before and held past 5 pm EST can be seen in the Trade Calculator.
On Wednesdays, the amount added or subtracted to an account as a result of rolling over a position is three times the usual amount. This 3-Day rollover accounts for settlement of trades through the weekend period. When there are bank holidays in either settlement country the normal roll schedule does not apply.
How Interest is Calculated
(The amount of the position in the base currency)
x (The difference in days between the current day’s value date and the next day’s value date)
x (interest rate)
/ (360 days, for gbp 365 days)
= Premium Charged
**Note: the interest is denoted in the base currency, if not already in US Dollars, it will be automatically converted to US Dollars**
***Note: Canada has a 1 day settlement therefore a 3 day roll is applied on Thursdays***