What are swap fees?
What are swap fees?
Swap fees, also known as overnight financing or rollover fees, are charges or credits that may apply when you hold a trading position open overnight.
The amount depends on several factors, including the product you trade, your position size and direction, and the applicable financing or swap rate.
1.How do swap fees work?
Different products use different rates and calculation methods to determine overnight financing.
Factor | Description |
|---|---|
Product type | The calculation method and applicable rate vary depending on the product being traded. |
Position size | The value of your position affects the amount of swap applied. |
Position direction | Buy (Long) and Sell (Short) positions may have different swap rates. |
Applicable rate | Depending on the product, the calculation may use a Benchmark Rate or a Futures Basis Rate. |
Depending on the applicable rate, holding a position overnight may result in either a charge or a credit to your trading account.
2. When are swap fees applied?
Swap fees are applied when an eligible position is held open past the applicable daily rollover time.
For Vantage UK, the rollover occurs at 24:00 Server Time(ST) (GMT+2 or GMT+3, depending on daylight saving time).
On certain days, a multiple-day swap may be applied to account for weekends or market settlement conventions. See “What is three-day financing?” below for more information.
3. How are swap fees calculated?
The calculation method varies depending on the product being traded. The table below provides an overview of the applicable reference rate, calculation method and Financing Charge or annual financing rate for each product category.
Product Type Cash CFD or Cash Spread Bets | Rate Source | Calculation | Financing Charge/ Rate |
|---|---|---|---|
Stocks, ETFs & Indices | Benchmark Rate | Lots × Price × (Benchmark Rate ± Financing Charge) ÷ 360 | 3.5% p.a. |
Forex & Spot Precious Metals | Benchmark Rate | Lots x Price x (Difference between the Benchmark Rates of the Currency Pair ± Financing Charge)/360 | 0.7% p.a. |
Commodities | Futures Basis | Lots x Price x ((Benchmark Rate ± Financing Charge)/360) ± a daily Future Contango or Backwardation pip adjustment) | 3% p.a. |
The applicable financing or swap rate may vary depending on the product, market conditions and position direction.
3.1 Stocks, ETFs and Indices
Swap fees for Stocks, ETFs and Indices are calculated using the applicable Base Rate and a 3.5% p.a. Financing Charge.
The Benchmark Rate is determined by the currency in which the underlying asset is denominated.
Index futures, including VIX, USDX, DJ30ft and NAS100ft, are not subject to swap charges.
📚Benchmark rates
Currency | Benchmark |
|---|---|
USD | SOFR |
GBP | SONIA |
EUR | €STR |
CHF | SARON |
JPY | TONAR |
AUD | AONIA |
CAD | CORRA |
📊Calculation
Long position
Swap Fee = Lots × Price × (Benchmark Rate + 3.5%) ÷ 360
Short position
Swap Fee = Lots × Price × (Benchmark Rate − 3.5%) ÷ 360
The resulting swap fee is calculated in the underlying asset's currency and may be converted into your account currency where applicable.
💡Example – Long NAS100 position
Assume you hold a 2-lot Buy (Long) position on NAS100.
For this example:
Item | Value |
|---|---|
Position size | 2 lots |
Closing price | 29,820 |
Benchmark Rate (SOFR- as the NAS100 is a USD based product) | 3.75% |
Financing Charge | 3.50% |
Step 1 – Determine the applicable financing rate
3.75% + 3.50%
= 7.25%
Step 2 – Calculate the daily swap fee
2 × 29,820 × 7.25% ÷ 360
= USD 12.01
The actual swap fee may vary depending on the applicable Benchmark Rate, Closing Price and Market conditions.
3.2 Forex and Spot Precious Metals
• Swap fees for Forex and Spot Precious Metals are primarily based on the Benchmark Rates of the applicable currency pair.
• A 0.7% p.a. Financing Charge is applied when determining the applicable swap rate.
• The Tom-Next Rate reflects the cost or benefit of rolling a position from one trading day to the next and may vary with market conditions.
For positions held open past 24:00 Server Time, the applicable Benchmark Rate is used to determine the overnight swap rate.
📊 Calculating the Swap Fee using Benchmark Rates
• When you trade in a currency pair, you are in effect buying one currency and selling the other. So, for example, if you buy the EURUSD pair you will be Long EUR and Short USD
• When you keep an FX position open overnight, you will pay interest in the currency you are Short of and receive interest in the currency you are Long of.
• The applicable rate for each currency is determined using the prevailing Benchmark Rates for each currency in a currency pair.
• The fee amount is generally expressed in the second currency of a currency pair. i.e. AUSUSD, the fee is in USD
Step 1 – Find the interest rates used
Each market is comprised of two currencies (i.e. the EURUSD market is comprised of Euro versus US Dollars).
If you have a Long(Buy) position in the EURUSD, this means you are Short of USD and Long of EUR, and vice versa if you have a Short(Sell) position. The Benchmark Rates will be €STR for the EUR and SOFR for the USD.
Step 2 – Calculate the Swap Rate
• For a Buy (Long) position:
Swap Rate = (Benchmark Rate for Currency 1 - Benchmark Rate for Currency 2) - Financing Charge
• For a Sell (Short) position:
Swap Rate = (Benchmark Rate for Currency 2 - Benchmark Rate for Currency 1) - Financing Charge
Step 3 – Calculate the Swap Fee
Swap Fee = Lots × Swap Rate × Contract Size × Point Size
💡Example – EUR/USD
Assume you hold a 1-lot Buy (Long) position on EUR/USD for one day.
• EUR Benchmark rate (€STR) = 2.44%
• USD Benchmark Rate (SOFR) = 3.86%
Item | Value |
|---|---|
Position size | 1 lot |
Interest Rate | (2.44-3.86) = -1.42 |
Closing price | 1.14698 |
Financing Charge | 0.7% p.a. |
Contract Size | 100,000 |
Point Size | 0.00001 |
Step 1 – Calculate the Applicable Swap Rate
-1.42 - 0.7
= -2.12%
Step 2 – Calculate the position size
=1(lot) x 100,000 x 1.14698
= $ 114,698
Step 3 – Calculate the Swap Fee
(-2.12% x 114,698) / 360
The applicable daily swap fee is therefore approximately minus USD 6.75
∴ Your account will be charged $6.75.
If the position had been a Short (Sell) of 1-lot of EURUSD, then the Applicable Swap Rate would have been (+3.86% - 2.44% - 0.7%) = +0.72%
So you would receive approximately (+0.72% x 114,698)/360 = $2.29
If the fee is not in the currency of your account, your eventual charge/receipt will be adjusted to reflect the calculated swap fee currency amount converted into the currency of your account. Because Benchmark Rates are set each day, the actual swap rate may vary from day to day.
3.3 Commodities
Swap fees for Commodities are calculated using the applicable Futures Basis together with a 3% p.a. Financing Charge.
The Futures Basis reflects the difference between the relevant futures contracts. Commodities markets generally have no spot (daily) market and so the cash commodities price that we display to you is calculated using a straight line from the price of the Front Month futures market to the price of the Next month futures market.
For example, if the August Brent Oil is currently quoted at 100.55 and the September is at 102.65 and the days between expiry of the August contract and the September contract is 30 days. Then it can be seen that the price must accrue by (102.65-100.55)/30 = 0.07 each day from the expiry of the previous (July) month to the expiry of this Front Month (August).
If we imagine that the quotes did not change for the entire month, then we can see that at the start of the month the quote we show you would be based around the August 100.55 price whilst at the end of the month it would be quoted around the 102.65 September price. And at the mid point of the 30 days it would be quoted around 101.60 (the mid point - (102.65+100.55)/2 ). So each day we must charge (or pay) you the difference caused by this price change.
Otherwise, if you have a Short position. You would be losing money as the price appreciated each day, when there had actually been no real change in the underlying (Futures) market prices or making money if your position were Long.
Step 1 – Calculate the Futures Basis
Market Basis = (Near-month Futures Price − Far-month Futures Price) ÷ T
Where:
T = number of days between the final trading day for each relevant futures contract.
Step 2 – Calculate the Financing Charge
Financing Charge = Closing Price × 3% ÷ 360
Step 3 – Calculate the Overnight Financing Adjustment
The overnight financing adjustment combines the applicable Futures Basis and the Financing Charge according to the direction of the position.
💡Example
Assume the following values for a commodity position:
Item | Value |
|---|---|
Current front-month futures price (P2) | 4,200 |
Next-month futures price (P3) | 4,470 |
Closing Price | 4,250 |
Days between expiry dates | 90 days |
Financing Charge | 3% p.a. |
Step 1 – Calculate the Futures Basis
(4,200 − 4,470) ÷ 90
= −3
Step 2 – Calculate the Financing Charge
4,250 × 3% ÷ 360
= 0.35
Step 3 – Calculate the Overnight Financing Adjustment
• The Futures Basis and Financing Charge are combined according to the direction and size of the position to determine the applicable overnight financing adjustment.
• If you were Long (Buy) 1 lot, you would be charged $3.35 (-3 - 0.35) and if you were Short(Sell) you would receive $2.65 (+3 - 0.35).
• The Futures Basis part of the Swap fee can (and does) vary through the month as markets change their perception of future events. It is very possible for the Next Month futures price to move from being above the Front Month price to below it.
4. What is three-day financing?
Three-day financing accounts for overnight financing that would otherwise occur during weekends or non-trading settlement days.
Instead of applying separate financing charges over the weekend, three days of financing may be applied on a designated weekday.
Product | Three-day financing day |
|---|---|
Stocks, ETFs and Indices | Friday |
Forex and Spot Precious Metals | Wednesday |
Commodities | Varies by commodity |
Important information
• Swap rates, Financing Charges and other applicable rates may be updated from time to time due to changes in market conditions or other relevant factors.
• In extreme market conditions, the rates may vary considerably from those stated above.
• The actual amount credited to or deducted from your account will depend on the product, position direction, position size and holding period.
• The examples provided above are for illustrative purposes only and may not represent the actual swap fee applied to your position.
• Please refer to the latest product specifications and applicable swap rates before keeping a position open overnight.