Getting a straightforward answer about daily rollover fees from your forex broker isn’t easy. Although rollover fees are based on the short term interest-rate differences of the two currencies you exchange for one another in the forex spot (cash) market, each FX dealer has its own rules, which can make the process confusing.
The spot market has a two-day settlement period, which means that if you buy one GBP/JPY standard lot (£100,000) on Tuesday, the transaction will settle on Thursday. If you hold this trade past 5 p.m. on Tuesday, your broker will roll the settlement forward to Friday and may add between $1 and $20 to your account as they calculate interest you earned.
As of Nov. 16, Great Britain’s short-term interest rate was 4.6 percent higher than Japan’s (4.75 percent and 0.15 percent, respectively, according to Forexnews.com). Therefore, the daily rollover credit on this trade is roughly $12.60, or ($100,000 * 4.6 percent)/365. (The actual rollover amount depends on your balance and the difference between GBP’s borrowing rate and JPY’s lending rate.)
Wednesday’s rollover is three times as large because it accounts for interest earned over the weekend. For example, if you enter and exit a trade on Wednesday prior to rollover, both trades settle on Friday. However, if you hold the trade “overnight” and close it after the rollover, your trade won’t settle until Monday, and you earn (or pay) three days of interest instead of one. Trades that should settle on holidays also earn (or owe) an additional day’s interest.
However, forex dealers are not obligated to pay interest. Some brokers, such as Forex Capital Markets (FXCM), only credit your account if you trade with at least 2 percent margin. Oanda calculates interest earned on currency pairs eachsecond, instead of once a day. Other brokers charge a daily rollover fee even if you’re long a higher-interest-rate currency.
Most FX dealers’ rollover time is 5 p.m. ET, but other brokers such as GFT Forex and MG Financial Group roll positions forward at 3 p.m. ET.
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