What is this?
A CFD is a leveraged product, which allows you to move a large amount of money on the market with only a small investment. The remaining funds which make up the total value of your position are provided by a market maker, for which a fee is required. A rollover or swap is the interest payment for each position which is held overnight. It represents the funds withdrawn or added to the client’s account from rolling over an open position from one day to the next. The actual fee or credit depends on whether you have invested in a long or short position.
As far as currency pairs are concerned, they are traded on the foreign exchange market, thus they act not only on two different currencies, but also potentially have two different interest rates. The difference and the direction of your position determines the amount of your fee or credit. The rollover on positions that you hold overnight can therefore lead to additional costs or gains.
You decide to go „Long“ on the currency pair EUR/USD, then you buy the Euro and sell the US Dollar. For the purposes of this example, we assume that the interest rate for the EUR is 0.80% while for the USD it is 0.50%. Upon going “Long”, you are getting 0.80% from the contract and you owe 0.50%. The difference between the two determines rollover costs, which in this case would amount to 0.30% on an annual basis. 1.0.80% – 0.50% = 0.30% Trading in a standard contract means that you can move a market volume of: 1 * 100,000 * $1.0975 = $109,750
For this position, two interest payments are calculated:
Long in EUR
$109,750 * 0.80% * 1/365 = $2.40
Short in USD
$109,750 * -0.50% * 1/365 = -$1.50
Thus you receive a payment of $0.90 ($2.40 – $1.50 = $0.90).
In the specifications, any rollover fees will be expressed in the form of pips, which for every open position will be added to or deducted from your account. An exact list of all rollover rates can be found HERE.
In general, financial markets have different trading hours. To set a standard so that our customers don’t need to keep track of all the different trading times when trading different products, the beginning and the end of a trading day has been set with 21:00 (GMT). This time is important in determining whether a rollover is calculated or not. Exceptions are made for longer-term futures contracts on commodities, here it is important to observe the exact expiration times.
All positions that are open at this time, or have been opened at this time, are classified as held overnight and a rollover fee will be applied. Positions which are opened after 21:01 o’clock (GMT) are not subject to rollover fees, unless they are held until the start of the next trading day.
Weekends and Holidays
On non-trading days, such as weekends and holidays, an additional rollover per non-trading day will be charged. This fee is due by most underlying assets on the Wednesday following the weekend or holiday.