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May 4, 2017

Question:Overnight Swap Points Calculation formula of FX, Commodity, Index, Share and ETF CFDs

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XM has updated the maximum leverage to 1:1000 in June 2022.

Leverage 1:1000 does not apply to client registered under the EU regulated entity of the Group. The maximum leverage for Trading Point of Financial Instruments is 30:1.

Answer:

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What is Swap – Overnight Financing (Charges)?

When trading leveraged Forex pairs and variety of CFDs online, your open deals are subject to Overnight Financing at the end of each trading day.

This Overnight Financing may be subject to credit or debit, calculated on the basis of the relevant interest rates for the currencies in which the underlying instrument is traded, plus a mark-up.

*Some financial instruments are subject to a separate mark-up.

Swap can be credited and debited

If the calculated Overnight Financing Percentage is positive, it means that an applicable amount will be added (credited) to your account balance.

A negative Overnight Financing Percentage means that an applicable amount will be subtracted (debited) from your account balance.

You can find the relevant Overnight Financing percentage, amounts and their related running times on both the Deal and Limit forms, under Tools, within the ‘Market Info’ tab.

To calculate the Overnight Financing, which your account will be debited or credited with, simply multiply the Overnight Financing percentage with the size of your deal.

Note that Overnight Financing on a Wednesday (or Friday) is 3 times more than usual as it covers the entire weekend period (Friday to Sunday). The Overnight Financing amount is either debited or credited in the other currency of your CFD.

If the CFD’s quoted currency differs from the account’s currency, it will be converted to the account’s currency.

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How to calculate Swap Points (Charges) of Forex currency pairs?

swap-point-charge-calculation-forex

Swap calculation for FX and CFDs are very similar.

The standard formula for Swap Calculation is as follows:

Swap = (One Point / Exchange Rate) * Trading Volume(Lot) * Swap Rate in Points

For a better understanding of the calculation, we have one example for you.

An Example of Swap Points (Charges) of Forex currency pairs

Here is an example of a Forex position carried over a night.

One Point: 0.00001
Account Base Currency: EUR
Currency Pair: EUR/USD
Exchange Rate: 1.0895 (EUR/USD)
Volume in Lots: 5 (One Standard Lot = 100,000 Units)
Short Swap Rate: 0.15

The final calculation will be the below:

Swap Value = (0.00001 / 1.0895) * (500,000 * 0.15)
Swap Value €0.69

Swap calculation is more complicated than the calculation of margin or profit/loss which are much simpler.

If you are bothered to calculate by yourself, you may open a free Demo account with XM or use the free Trading Tool(Forex Calculator) in the XM official website.

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Another way – Swap Points (Charges) calculation of Forex currency pairs

If the above calculation does not apply for your broker’s platforms, then there is another way to calculate the Swap Points (Charges).

Calculation of Overnight Financing Percentage when you Buy (Long Positions):

Overnight Financing Percentage = -(3M interest rate of the other currency – 3M interest rate of the base currency + Markup / 360)

Calculation of Overnight Financing Percentage when you Sell (Short Positions):

Overnight Financing Percentage = -(3M interest rate of the other currency – 3M interest rate of the base currency – Markup / 360)

To calculate the Overnight Financing Amount, simply multiply the percentage by the deal amount:

Overnight Financing Amount = Deal Amount × Overnight Financing Percentage

Examples of Forex Swap Points (Charges) Calculation

Example I – Forex Swap Points (Charges)

This example involves a situation whereby the Interbank Rate difference is HIGHER than the markup.

In such cases, your account will be debited when you go Long and credited when you go Short:

Instrument EUR/USD (Euro vs. US Dollar)
EUR (base currency) 3M interest rate (annualized) -0.37% = -0.0037
USD (other currency) 3M interest rate (annualized) 1.08% = 0.0108
Interbank Rates difference 1.45% = 0.0145
Markup (if applicable) 0.75% = 0.0075
Deal Amount value expressed in the other currency 106,550 USD (100,000 EUR at Current Closing Rate of 1.0655)

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Overnight Financing Percentage when you Buy (Long Positions)

Overnight Financing Percentage = – (0.0108 – (-0.0037) + 0.0075 / 360) = -0.0000611 = -0.00611%

Overnight Financing Amount = 106,550 × (-0.0000611) = -6.51 USD, meaning 6.51 USD charge per day

Overnight Financing Percentage when you Sell (Short Positions)

Overnight Financing Percentage = (0.0108 – (-0.0037) + 0.0075 / 360) = 0.00001944 = 0.001944%

Overnight Financing Amount = 106,550 × 0.00001944 = 2.07 USD credit per day

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Example II – Forex Swap Points (Charges)

This example involves a situation whereby the Interbank Rate difference is LOWER than the markup.

In such cases, your account will be debited each night regardless of your position’s direction:

Instrument GBP/JPY (British Pound vs. Japanese Yen)
GBP (base currency) 3M interest rate (annualized) 0.39% = 0.0039
JPY (other currency) 3M interest rate (annualized) -0.09% = -0.0009
Interbank Rates difference 0.48% = 0.0048
Markup (if applicable) 0.75% = 0.0075
Deal Amount value expressed in the other currency 13,620,000 JPY (100,000 GBP at Current Closing Rate of 136.20)
Overnight Financing Percentage when you Buy (Long Positions)

Overnight Financing Percentage = – ( (-0.0009) – 0.0039 + 0.0075 / 360) = – 0.0000075 = – 0.00075%

Overnight Financing Amount = 13,620,000 × (-0.0000075) = -102.15 JPY, meaning 102.15 JPY charge per day (≅1 USD)

Overnight Financing Percentage when you Sell (Short Positions)

Overnight Financing Percentage = ( (-0.0009) – 0.0039 – 0.0075 / 360) = – 0.000034167 = – 0.0034167%

Overnight Financing Amount = 13,620,000 × (-0.000034167) = -465.35 JPY, meaning 465.35 JPY charge per day (≅4.5 USD)

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Example III – Forex Swap Points (Charges)

This example involves a situation whereby the Interbank Rate difference is LOWER than the negative markup.

In such cases, your account will be debited when you go Short and credited when you go Long:

Instrument USD/JPY (US Dollar vs. Japanese Yen)
USD (base currency) 3M interest rate (annualized) 0.39% = 0.0039
JPY (other currency) 3M interest rate (annualized) -0.09% = -0.0009
Interbank Rates difference -1.17% = -0.0117
Markup (if applicable) 0.75% = 0.0075
Deal Amount value expressed in the other currency 10,341,000 JPY (100,000 USD at Current Closing Rate of 103.41)
Overnight Financing Percentage when you Buy (Long Positions)

Overnight Financing Percentage = – ( (-0.0009) – 0.0108 + 0.0075 / 360) = 0.00001167 = 0.001167%

Overnight Financing Amount = 10,341,000 ×0.00001167=120.65 JPY credit per day (≅1.1 USD)

Overnight Financing Percentage when you Sell (Short Positions)

Overnight Financing Percentage = ( (-0.0009) – 0.0108 – 0.0075 / 360) = – 0.0000533 = – 0.00533%

Overnight Financing Amount = 10,341,000 ×(-0.0000533)=-551.52 JPY,meaning 551.52 JPY charge per day (≅5.3 USD)

Swap Points (Charges) calculation for Share, ETF, Index and Commodity CFDs

When trading leveraged Share, ETF, Index and Commodity CFDs with iFOREX, your open deals are subject to Overnight Financing at the end of each trading day.

This Overnight Financing may be subject to credit or debit, calculated on the basis of the relevant interest rates for the currencies in which the underlying instrument is traded, plus a mark-up.

List of Online CFD Brokers

Swap Points Calculation of Index CFDs

swap-point-charge-calculation-index-cfd

Example 1 – Index CFDs Swap Calculation

This example involves a situation whereby the Interbank Rate is HIGHER than the markup. In such cases, your account will be debited when you go Long and credited when you go Short:

Instrument Brazil Ibovespa
Brazilian Real (BRL) 3M interest rate (annualized) 9.567% = 0.09567
Markup (if applicable) 2.5% = 0.025
Deal Amount value expressed in currency 127,380 BRL (2 Index contracts at Current Closing Rate of 63690 BRL per contract)
Overnight Financing Percentage when you Buy (Long Positions)

Overnight Financing Percentage = – ((0.09567 + 0.025) / 360) = -0.0003351944 = -0.03351944%

Overnight Financing Amount = 127,380 × (-0.0003351944) = -42.70 BRL, meaning a 42.70 BRL charge per day (≅13.58 USD)

Overnight Financing Percentage when you Sell (Short Positions)

Overnight Financing Percentage = ((0.09567 – 0.025) / 360) = -0.00019630556 = 0.019630556%

Overnight Financing Amount = 127,380 × 0.00019630556 = 25 BRL credit per day (≅7.95 USD)

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Example 2 – Index CFDs Swap Calculation

This example involves a situation whereby the Interbank Rate is LOWER than the markup.

In such cases your account will be debited each night regardless of the direction of your position:

Instrument Oil (Crude Light WTI)
US Dollar (USD) 3M interest rate (annualized) 1.08% = 0.0108
Markup (if applicable) 2.5% = 0.025
Deal Amount value expressed in currency 53,250 USD (1,000 Oil barrels at Current Closing Rate of 53.25 USD per barrel)
Overnight Financing Percentage when you Buy (Long Positions)

Overnight Financing Percentage = – ((0.0108 + 0.025) / 360) = -0.00009944 = – 0.009944%

Overnight Financing Amount = 53,250 × (-0.00009944) = -5.30 USD, meaning a 5.30 USD charge per day

Overnight Financing Percentage when you Sell (Short Positions)

Overnight Financing Percentage = ((0.0108 – 0.025) / 360) = -0.00003944 = -0.003944%

Overnight Financing Amount = 53,250 × (-0.00003944) = -2.10 USD, meaning a 2.10 USD charge per day

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Swap Point Calculation of Share and ETF CFDs

swap-point-charge-calculation-share-and-etf-cfds

Example 1 – Share and ETF CFDs Swap Calculation

This example involves a situation whereby the Interbank Rate is HIGHER than the markup.

In such cases your account will be debited when you go Long and credited when you go Short:

Instrument Gazprom (GAZP)
Russian Ruble (RUB) 3M interest rate (annualized) 9.5% = 0.095
Markup (if applicable) 2.5% = 0.025
Deal Amount value expressed in currency 2,459,000 RUB (20,000 Shares at Current Closing Rate of 122.95 RUB per share)
Overnight Financing Percentage when you Buy (Long Positions)

Overnight Financing Percentage = -((0.095 + 0.025) = -0.000333333 = -0.0333333%

Overnight Financing Amount = 2,459,000 × (-0.000333333) = -819.67 RUB, meaning a 819.67 RUB charge per day (≅14.60 USD)

Overnight Financing Percentage when you Sell (Short Positions)

Overnight Financing Percentage = ((0.095 + 0.025) / 360) = 0.000194444 = 0.0194444%

Overnight Financing Amount = 2,459,000 × 0.000194444 = 478.14 RUB credit per day (≅8.52 USD)

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Example 2 – Share and ETF CFDs Swap Calculation

This example involves a situation whereby the Interbank Rate is LOWER than the markup.

In such cases, your account will be debited each night regardless of your position’s direction:

Instrument Apple (AAPL)
US Dollar (USD) 3M interest rate (annualized) 1.08% = 0.0108
Markup (if applicable) 2.5% = 0.025
Deal Amount value expressed in currency 70,600 USD (500 Shares at Current Closing Rate of 141.20 USD per share)
Overnight Financing Percentage when you Buy (Long Positions)

Overnight Financing Percentage = – ((0.0108 + 0.025) / 360) = -0.00009944 = -0.009944%

Overnight Financing Amount = 70,600 × (-0.00009944)= -7.02 USD, meaning a 7.02 USD charge per day

Overnight Financing Percentage when you Sell (Short Positions)

Overnight Financing Percentage = ((0.0108 – 0.025) / 360) = -0.00003944 = -0.003944%

Overnight Financing Amount = 70,600 × (-0.00003944) = -2.78 USD, meaning a 2.78 USD charge per day

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Swap Point Calculation of Spot Commodities

swap-point-charge-calculation-commodity-cfd

Calculation of Swap points for CFD futures markets is a bit complicated than other markets’.

All finance adjustments for open positions in spot commodities are carried at or after 17:00 ET.

Finance adjustments are not made on open positions on CFD futures markets.

Extra financing may apply on stocks that are hard to borrow.

As you hold a position overnight (i.e. after 17:00 ET), a finance adjustment is made to your account.

This is calculated as follows:

f= (v * r) / d

Where:

f daily financing charge
v notional value of underlying equity calculated based on closing price as determined by Royal
r relevant interest rate, PLUS 250 basis points for long positions, MINUS 250 basis points for short positions, e.g. (0.50% + 2.50%) = 3.00%
d number of days, i.e. we use 365 days for indices with denominated currency of GBP or AUD.

List of Commodity CFD Brokers

Otherwise, we can use 360 days.

(Notional value = Price * Number of CFDs/Tick Value)

Long (buy) trade positions are debited the daily financing charge.

Short (sell) positions are normally credited the daily financing charge.

However, you will be debited and not credited with the financing charge when the relevant interest rate is less than the number of basis points to be deducted from that relevant interest rate.

A broker may credit short positions when LIBOR is greater than the basis points to be deducted from LIBOR.

Please note: that during Rollover, which occurs at 5pm New York time (which is 00:00 MT4 server time) when we move from one trading day to the next, Liquidity Providers will remove their pricing from the market and reinstate with a new value date. This means that the market becomes highly illiquid for up to 5 minutes either side of this rollover period where spreads tend to widen and execution may be challenging where slippage can occur. In severe instances of illiquidity you may not be able to execute at all during this 10 minute period during rollover until the liquidity returns.

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