Financing

FX Rollovers

The majority of Forex transactions are carried out on the spot market. If you decide that you want to carry your position over to the next trading day your open position(s) will automatically be rolled forward to the next spot settlement date. This is normally done at 10.00pm London time each day.
All open positions are rolled over based on the daily interest rate differential between the two currencies. Rollover rates can vary on a day to day basis depending on the changes in daily interest rates.
The rates are referred to as Tom/Next rates Tom/Next rates are taken from the inter-bank market and applied to your positions.
Below is an attempt to explain the principle behind the rate calculations and an example of how they are applied to a position you may hold.

Principle:

If you were to hold a position in GBP vs USD of long 100,000 GBP at a level of 1.8451, then effectively you are borrowing from us 100,000 GBP and you would be lending us 184,510 USD

For borrowing the 100,000 GBP you would be charged one night of interest at the overnight GBP rate. Likewise, for lending us the 184,510 USD, you would be due to receive interest at the overnight USD rate.

The differential between the two rates can be summed to a value of points to be either added to, or taken from, the level at which you hold your position.

Example :

You hold a position of 100,000 GBPUSD @ 1.8451
The mark-to-market price for the day is 1.8574
The tom/next rates taken from the Interbank market indicate that the interest rate differential means that you receive 0.000145 points (referred to as points off). You will see 2 trades on your account to this effect:

Sell 100,000 GBPUSD @ 1.8574000 (the mark-to -market level)
Buy 100,000 GBPUSD @ 1.8572550 (1.8574 - 0.000145)

In P/L terms the profit from this roll-over is 100,000 x 0.000145 = 14.50 USD