Why is overnight funding charged and how is it calculated?

When trading a CFD, you’re using leverage. This means you are effectively being lent the money required to open your position, outside the initial deposit you’ve paid.

Let’s say you’re using a cash CFD, designed primarily for short-term positions. If you want to keep it open overnight, you will be charged for the entire position.

The charge will be triggered once you pass the daily cut-off time (typically 11pm Swiss time, although this may vary for international markets). If you close your position on the same day before this time, there is no funding fee.

Note, overnight funding is only paid on cash CFDs. For future products, or those with an expiry date, you don’t pay this charge – instead, they have a wider spread.

Shares, indices and other markets

For the majority of markets, other than forex and spot metals, our funding fee is comprised of our admin fee plus or minus the relevant interbank rate for the currency in which the underlying instrument of your trade is denominated (depending on whether your position is long or short). The interbank rate is the interest rate charged between banks for short-term loans. It is a key indicator for other interest rate charges.

Let’s say you have a long trade on a Swiss share, made in CHF. Our funding charge would be based on the one-month CHF LIBOR (London Interbank Offered Rate), which is the interest rate that major banks charge to lend funds to each other. We would calculate it like this:

For a short position on the same market, the calculation would be the same except that LIBOR would be deducted from our 2.5% admin fee. Mini contracts incur a 3% admin fee.

Forex and spot metals

For forex and spot metals deals, we charge the tom-next rate plus an IG's charge for holding positions overnight of 0.0022% a day.

Tom-next, an industry-standard rate, is short for 'tomorrow-next day', and is the means by which forex speculators are able to keep forex positions open overnight without taking physical delivery of a currency. They manage this by swapping any overnight positions for an equivalent contract that starts the next day. The price difference between the two contracts is called the tom-next adjustment.

To give an example, let’s say you’re trading on a forex pair for which the tom-next rate is -1.39/-0.39. In this case we’d use:

  • -0.39 to calculate the funding cost on a long position
  • -1.39 to calculate the funding cost on a short position

And our calculation would look like this: