I can see funding charges on my account, what are these charges? Overnight Fees explained
Overnight transactions, also known as ‘Swap Rates’ (swaps) or ‘Holding Costs’, are fees incurred on your account if you decide to trade over a market cut-off time (typically 10 pm UK time/5 pm New York time but it differs depending on the market).
When placing a trade, you are using leverage which effectively means you are being lent money to open the position. The overnight fee highlights the borrowing cost of the trade. Whether you're going Long or Short, you'll be subject to the fee if your positions pass the daily cut-off time and will either be charged or credited depending on the direction of the trade and the applicable holding rate.
When do I get charged overnight fees?
Swap fees are applied at 10pm GMT every day (including weekends) if you keep your trades open past that time. If you'd like further information on how this is calculated, please contact us at support@tradenation.com.
Do I get charged for having any position open overnight?
Swap fees are applied if you are trading in a cash market, this means any market that ends in “- Rolling Spot”. If you're trading in a futures market (any instrument which ends in “- Future”), then there's no overnight fee as this is already built into the market price.
Calculating overnight fees
Please find examples below.
Non FX: Overnight Financing Calculation
Buy Position Example:
- Instrument: 1 Wall Street 30
- End of Day Price: £39,000
- Bet Size: £1 per point
- Federal Reserve Rate: 5.5%
- Fixed Cost: -2.5%
- Days per Annum: 360
Calculation:
1. Trade Value = £1 * £39,000 = £39,000
2. Interest Rate Differential = (-5.5% - 2.5%) = -8%
3. Annual Charge = £39,000 * -8% = -£3,120
4. Daily Charge = -£3,120 / 360 = -£8.66 per night (debit)
Sell Position Example:
- Instrument: 1 Wall Street 30
- End of Day Price: £39,000
- Bet Size: £1 per point
- Federal Reserve Rate: 5.5%
- Fixed Cost: -2.5%
- Days per Annum: 360
Calculation:
1. Trade Value = £1 * £39,000 = £39,000
2. Interest Rate Differential = (5.5% - 2.5%) = 3%
3. Annual Charge = £39,000 * 3% = £1,170
4. Daily Charge = £1,170 / 360 = £3.25 per night (credit)
FX: Overnight Financing Calculation
Buy Position Example:
- Instrument: GBPUSD
- End of Day Price: 1.2797
- Bet Size: £1 per point
- Bank of England Rate: 5.25%
- Federal Reserve Rate: 5.5%
- Fixed Cost: -2.5%
- Days per Annum: 360
Calculation:
1. Trade Value = £1 * 1.2797 / 0.0001 = £12,797
2. Interest Rate Differential = (5.25% - 5.5% - 2.5%) =-2.75%
3. Annual Charge = £12,797 * -2.75% = -£351.92
4. Daily Charge = -£351.92 / 360 = -£0.98 per night (debit)
Sell Position Example:
- Instrument: GBPUSD
- End of Day Price: 1.2797
- Bet Size: £1 per point
- Bank of England Rate: 5.25%
- Days per Annum: 360
Calculation:
1. Trade Value = £1 1.2797 / 0.0001 = £12,797
2. Interest Rate Differential = (-5.25% + 5.5% - 2.5%) = -2.25%
3. Annual Charge = £12,797 * -2.25% = -£287.93
4. Daily Charge = -£287.93 / 360 = -£0.80 per night (debit)