Funding charges definition

Funding charges, or interest charges, are the fees levied on leveraged positions that are held open overnight.

This is because leveraged trades are made using margin, meaning that you only provide a deposit in order to open the trade. You are in effect borrowing the rest of the position’s total cost from your provider. Funding charges are the cost of borrowing this money over more than one day.

Calculating funding charges

Funding charges are calculated differently dependent on your provider, what leveraged product you are using and what market you are trading. For example, at IG funding charges for spread betting or CFD trades are the same, but are based on interbank rates (like LIBOR) for stocks and tom-next rates for forex.

Forward contracts or bets will not incur any funding charges, as the cost to keep them open is taken care of via the spread or commission charge. There is also no cost to keep a share dealing trade open, because share dealing trades are not made using leverage.

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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.

The value of shares, ETFs and ETCs bought through a share dealing account, a stocks and shares ISA or a SIPP can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results.

CFD, share dealing and stocks and shares ISA accounts provided by IG Markets Ltd, spread betting provided by IG Index Ltd. IG is a trading name of IG Markets Ltd (a company registered in England and Wales under number 04008957) and IG Index Ltd (a company registered in England and Wales under number 01190902). Registered address at Cannon Bridge House, 25 Dowgate Hill, London EC4R 2YA. Both IG Markets Ltd (Register number 195355) and IG Index Ltd (Register number 114059) are authorised and regulated by the Financial Conduct Authority.

The information on this site is not directed at residents of the United States, Belgium or any particular country outside the UK and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

Funding charges definition

Calculating funding charges

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