Rollover is the process of extending the settlement date of an open position
(i.e. date by which an executed trade must be settled). The forex market allows two business days
for settling all spot trades, which implies the physical delivery of currencies.
TradeCMX Rollover Policy
TradeCMX debits or credits clients’ accounts, and handles rollover interest at competitive rollover rates for all positions held open after 22:00 GMT.
Although there is no rollover on Saturdays and Sundays when the markets are closed, banks still calculate interest on any position held over the weekend. To level this time gap, TradeCMX applies a 3-day rollover strategy on Wednesdays.
Rollover is the process of extending the settlement date of an open position (i.e. date by which an executed trade must be settled). The forex market allows two business days for settling all spot trades, which implies the physical delivery of currencies.
In margin trading, however, there is no physical delivery, so all open positions must be closed daily at end-of-day (22:00 GMT) and re-opened on the following trading day. This pushes out the settlement by one more trading day. This strategy is called rollover.
Rollover is agreed on through a swap contract which comes at a cost or gain for traders. TradeCMX does not close and re-open positions but debits/credits trading accounts for positions held open overnight, depending on the current interest rates (LIBOR/LIBID with added mark-up).
Every currency trade is based on borrowing one currency in order to buy another. Interest is paid on the borrowed currency and earned on the purchased currency. For instance, if we assume that the interest rates in Japan and the US are 0.25% p.a. and 2.5% p.a. respectively, and you have a buy position of 1 lot in USDJPY at 118.50, you will earn 2.5% per year on your USD and pay 0.25% per year on your borrowed JPY.
This means that with an open position you gain USD 6.16 per day [100,000* (2.5%-0.25%)/365]. This amount is credited to your account and equivalent to 0.73 pips per day [118.50* (2.5%-0.25%)/365]. Similarly, if you have a short position in USDJPY, you lose USD 6.16 per day. Thus rollover interest can provide an added stream of profit or loss for you.
22:00 GMT is considered to be the beginning and the end of a forex trading day. Any positions which are still open at 22:00 GMT sharp are subject to rollover and will be held overnight. Positions opened at 22:01 are not subject to rollover until the next day, but if you open a position at 21:59, a rollover will take place at 22:00 GMT. For each position open at 22:00 a credit or debit appears on your account within 1 hour, and will be directly applied to your equity account.
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