Financing costs for OANDA Corporation clients 

This FAQ contains the following information:
 

This information is only applicable to those who contract an account with OANDA Corporation. If you are not sure which division you contract with, you can get that information via our website.

If you have an open position on your account at the end of each trading day (5pm ET), the position is considered to be held overnight and subject to either a ‘financing cost’ or ‘financing credit’ to reflect the interest differential between the currencies involved in this trade.

The ‘financing cost’ or ‘financing credit’ is calculated on a per position basis and may be a debit or a credit, depending on whether the position is a buy/long position or a sell/short position and depending on the applicable funding rate as described below.

Financing cost or credit = position value x applicable funding rate x1/365

Position value = size of your position x price of instrument at 5pm ET

Funding rates (sometimes called the ‘swap rate’) vary from instrument to instrument and may change on a daily basis. These are quoted as an annual rate with two quoted per instrument (one for a buy/long position and the other for a sell/short position). A negative funding rate results in a cost for you while a positive funding rate results in a credit to you.

The resulting sum of all financing costs will be credited to or debited from your account and will be visible within your ‘Transaction History’ on the fxTrade platform.

For further information on how OANDA calculates our funding rates, please visit our website.


How does OANDA Corporation calculate funding rates?

Our funding rates are based on the specific asset type. Below is a table that outlines the financing rate:
 
Asset class
Long positions
Short positions 
Forex

 
Our rates are based on the tom-next (tomorrow to next day) rate in the underlying market for the currency pair and are expressed as an annualized percentage.
Our rates are based on the tom-next (tomorrow to next day) rate in the underlying market for the currency pair and are expressed as an annualized percentage.

Tom-next rate

Tomorrow-Next refers to the rolling over of a position in the currency markets to postpone delivery. A trader can roll over their position to the next two business days later to avoid taking delivery and holding onto the currency at the same time. Generally, the expected delivery of the asset is two days after any transaction, but this can vary depending on the currencies involved (e.g. one day for USD/CAD). The date of settlement is known as the spot date. Tom-next can be used to extend the trade beyond this date. It enables an overnight position to be extended instead of taking physical delivery of the asset.

Banks in the underlying market trade currencies based on different rates for buy and sell positions. Rates can change daily as they are based on the underlying market price. Tom-next rates are based on interest rate differentials between the two currencies. If the interest on the first currency is higher than the second currency on a long/buy position, then it normally results in a positive funding rate and vice versa (barring some exceptions).


How are financing costs affected by holidays and weekends?

FX trades are typically settled on a T+2 basis, and the funding rate reflects the cost to push forward the settlement date by one day so that you can hold the position indefinitely. If you hold a position on Wednesday at 5:00 pm, the funding rate will typically be tripled to reflect pushing forward the settlement by three days instead of one day. This is because at the end of Wednesday the settlement date needs to be pushed forward from Friday to Monday, and the funding rate reflects the cost to hold the position over the weekend. There are no financing charges or credits on Saturday or Sunday. The actual funding rate on any given date may reflect more than one day depending on the instrument or due to market holidays.  Below are examples of OANDA’s financing charges:

Examples of forex (FX) financing costs (illustrative purposes only)

Assumptions:

In the example below, if you were holding a buy/long position of EUR/USD you would be paying financing costs in sum of -3.00% overnight. However, if you were holding a sell/short position of EUR/USD you would be receiving financing credits in the sum of +1.60% overnight.
 
Instrument
Long funding rate
Short funding rate
EUR/USD

 
-3.00%
+1.60%

Example 1 

Client opens a long 100,000 EUR/USD trade at 8:30am ET Wednesday and closes it at 3:30pm ET Wednesday.

Result: there are no financing costs for this client, as no open position held at 5pm ET end of day.


Example 2

Client has a long 130,000 EUR/USD trade open at 5pm ET Tuesday.

Financing cost = 130,000 x -3.00% x 1/365 = -10.68 EUR

Result: a financing cost of 10.68 EUR will be applied to the client’s account. If the client’s account home currency is not EUR, the financing cost will be converted to the client’s account home currency at the prevailing rate at 5pm ET.


Example 3

Client has a short 130,000 EUR/USD trade open at 5pm ET Wednesday, they will be charged three times the regular rate.

Financing cost = 130,000 x 4.8% x 1/365 = 17.10 EUR

Result: a financing credit of 17.10 EUR will be applied to the client’s account. If the client’s account home currency is not EUR, the financing cost will be converted to the client’s account home currency at the prevailing rate at 5pm ET.

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