1. Help Center
  2. faq
  3. 6. Product Information

What is a swap?

A “swap” is the process of keeping a position open at the end of the trading day and therefore continuing to hold the position for the following trading day. An interest rate that can be a credit or debit is placed on the position when swaps are processed.

Swap rates each end of day are published on our Client Portal prior to the end of day. And can be seen using this link: https://client.valutrades.com/swaps

FX Swaps

The interest credit or debit reflects the interest differential between the two currencies of the currency pair for maintaining the position. The value of the credit or debit is defined as the difference between the interest rates of both currencies in the FX pair, considering which currency the client is borrowing (buying) and which currency the client is lending (selling).

Currency pairs typically settle on T+2, which means that the value date (settlement date) is two business days ahead of the trade date. The exceptions to this rule are USDCAD, USDTRY and USDRUB, where the value date is one business day ahead of the trade date.

For example, if you traded a buy of GBPUSD, GBP is the base currency (first currency) and USD is the term currency (second currency) and you are buying GBP and selling USD. If GBP has an interest rate of 2% and USD has an interest rate of 1%, you would be credited the differential (the difference between the interest rates) of (2%-1%) =  1% / 365 per day. If you traded a sell of GBPUSD, the opposite would occur, and you would be debited the differential of (1%-2%) =  -1%/ 365 per day.

The overnight rate is calculated by the amount of nights you hold the position open, therefore if you hold the position open on a Wednesday night for T+2 currency pairs, rollover would be three times as much due to the position being carried over two extra days (the weekend). For T+1 currency pairs, three times rollover is applicable on Thursday night. Additionally, it is important to note that rollover can be more when taking into account Public Holidays.

CFDs

CFDs have no value date (settlement dates) and therefore are treated like T+0 meaning the three times swap is applied on Friday nights. An overnight financing amount is credited or debited to your account. Overnight financing reflects the cost of borrowing or lending the underlying asset. This is charged at the equivalent interest rate depending on the currency the CFD is based in. For example if you buy DE30 you would receive or pay interest in EUR.

Oil

Oil behaves like a futures contract where the settlement is a fixed date each month. This means that each night there is no swap applied to Oil positions. The day before the settlement date each Oil position is rolled to the next months settlement date. At this time the price of Oil will move to the price of the new months contract, pending orders (Limit and Stop) will be amended to reflect the price change and a credit or debit equal and opposite to the price change will be applied to the account.