How do swap points, rollover, and overnight interest work on XM? Table of Contents
Keep your positions open overnight on XM
Positions that remain open overnight may be charged rollover interest.
In the case of forex instruments, the amount credited or loaded depends both on the position taken (ie long or short) and on the interest rate differentials between the two traded currencies.
For stocks and stock indices, the amount credited or charged depends on when a long or short position has been taken.
Please note that rollover interest only applies to liquid instruments.
For future products, which have an expiration date, there are no overnight charges.
What is the Rollover of positions?
Rollover describes the process of extending the settlement date (the date when an order must be executed) of an open position.
The forex market allows 2 business days to settle all spot trades, which in this case means the delivery of currencies.
However, in margin trading, there is no physical delivery and therefore all open positions must be closed at the end of the day (22:00 GMT) and reopened on the next trading day.
Therefore, this carries over the settlement to one more trading day.
This strategy is called a rollover.
The rollover is agreed with a swap contract, which has a cost or a profit for traders.
XM does not close or reopen positions; you simply debit or credit trading accounts for positions that are kept open overnight, depending on current interest rates.
XM’s rollover policy
XM debits or credits client accounts and manages rollover interest at competitive rates for all positions held open after 22:00 GMT, daily bank closing time.
Even though there is no rollover on Saturdays and Sundays, when markets are closed, banks still calculate interest on positions held open on weekends.
To balance this out, XM applies a 3-day rollover charge on Wednesdays.
How to calculate overnight interest (swap points)?
1. For Forex and spot metals (gold and silver)
Rollover rates for spot metals and forex positions are charged the morning-next-day interest rate (i.e., tomorrow and next day), including XM’s profit margin to hold positions overnight.
The morning-next-day rates are not determined by XM but are derived from the interest rate differential between the two currencies in which a position was taken.
Example:
Assuming you trade USDJPY and morning-next-day rates are as follows:
+ 0.5% for a long position
-1.5% for a short position
In this scenario, interest rates in the US are higher than in Japan. A long position of the currency pair held open overnight would receive + 0.5% – XM’s profit margin.
In contrast, for a short position, the calculation is -1.5% – XM’s profit margin.
More generally, the calculation is as follows:
Trade size * (+/- morning-next-day rate – XM profit margin)
Use the online calculator on XM Official Website
2. For stocks and stock indices
Rollover rates for positions on stocks and stock indices are determined by the underlying interbank rate of the stock or index (for example, for security traded in Australia, this would be the interest rate charged among Australian banks for short-term loans ), plus / minus XM’s profit margin for long and short positions respectively.
Example:
Assuming you trade Unilever (UK-listed security) and the UK short-term interbank rate is 1.5% per annum, for a long position held overnight, the calculation is as follows :
-1.5% / 365 – XM daily profit margin
In contrast, the calculation for a short position is + 1.5% / 365 – XM’s daily profit margin.
More generally, the calculation is as follows (with daily rates as shown):
Trade size * closing price * (+/- short-term interbank rate – XM profit margin)
Here, +/- depends on whether one has taken a short position or a long position for an instrument.
The time of position rollover
22:00 GMT is considered the start and end of a trading day.
Any position that remains open at 22:00 GMT is subject to a rollover and will remain open overnight.
Positions opened at 22:01 are not subject to overnight rollover, but if you open a position at 21:59, a rollover will take place at 22:00 GMT.
For each position opened at 22:00 GMT, credit or debit will appear on your account within one hour.
Invest in Forex and CFDs on XM
Please check XM official website or contact the customer support with regard to the latest information and more accurate details.
XM official website is here.
Please click "Introduction of XM", if you want to know the details and the company information of XM.
IronFX
Comment by Diletta
March 26, 2024
Awesome bonuses, good leverage. A few hiccups, but support rocks!