OANDA offers a CFD instrument whose pricing is derived from the underlying futures contract. The price you see in the fxTrade platform is not a futures price, but rather a theoretical cash price. The theoretical cash price offered by OANDA is derived by discounting (with the interest rate) the underlying futures contract over the time between today and the expiry date of the underlying futures contract to obtain a present value price.
OANDA's daily CFD finance fee is considered as roll-over cost, so instead of doing a calendar roll-over and charging a roll-over fee when the underlying futures contract expires, we pay/charge finance fees on positions. The implied interest rate that OANDA uses is based on present valuing the next contract (far) to our theoretical cash price when we need to roll the future contract. OANDA assumes that on the date of expiry of the futures contract, the futures price will equal the (theoretical) cash price for CFD products. This means the time parameter in OANDA's calculations will be the time until expiry of the futures contract. The current futures contract being used to price the CFD products will be regarded as the "Near Futures" and the futures contracts will be rolling pricing into the "Far Futures". At the time of expiry, we set the discount rate for the far futures so that the cash price calculated from that futures is equal to the cash price of the near futures.
CFD Financing Charges
Understanding your CFD finance fees is important because CFD interest rates for finance fees can fluctuate significantly.
CFD finance fees, whether paid or received, are assessed using the discount rate associated with the CFD. OANDA applies a spread to the discount rate. OANDA publishes its CFD finance rates, expressed as bid and ask rates for each CFD, in real-time on OANDA’s Historical Interest Rates Tool.
Your CFD finance fees on an open position will be netted meaning that the interest rate earned or charged on a CFD trade will be the difference between the CFD interest rate and the interest rate on the currency. You will pay finance charged in the event of a negative interest rate and you will earn finance credits in the event of a positive interest rate.
Please note that on V20 accounts, when the financing rate changes the change is applied to the whole day on which the change is made, rather than from the point in time that the updated rate is shown. This is particularly relevant to clients trading CFDs as finance rates can fluctuate significantly. When you close a position the financing rate at that moment in time is used to calculate the final financing fee, and there is no attempt to retrospectively either seek or make payment should the financing rate change later in the day.
To illustrate how finance fees will be applied when trading CFDs, we have set out an example.
Suppose James opens a long position in US Wall St 30, a CFD which is priced against USD. Note: this example uses sample interest rates that do not reflect current market interest rates.
US Wall St 30 (CFD): Yearly Bid Rate: 1.50%, Yearly Offer Rate: 3.50%
USD (Currency): Yearly Bid Rate: 0.10%, Yearly Offer Rate: 0.50%
CFD Net Interest Rates
LONG Annual Interest Rate: 1.00%
Calculation = bid US Wall St 30 – offer USD = 1.50 – 0.50 = 1.00
SHORT Annual Interest Rate: -3.40%
Calculation = bid USD – offer US Wall St 30 = 0.10 – 3.50 = -3.40
In this scenario, James would receive a 1.00% annual finance credit while holding the long CFD position. If he had opened a short CFD position, James would have been charged a 3.40% annual finance charge while holding the position.
It is important to note that CFD net interest rate can be either positive or negative, regardless of whether a trader’s position is long or short.