Why is overnight funding charged and how is it calculated?

If you hold a short-term trade and want to keep it open overnight, you’ll be charged a daily interest fee.

This charge will be applied to cash CFD positions held through 10pm (UK time).

Futures and forwards don’t incur overnight funding charges, but they do have wider spreads. These contracts are typically used for longer-term trades.

Why is overnight funding charged?

When placing 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. To keep your position open after 10pm (UK time), an interest adjustment will be made to your account to reflect the cost of funding your position overnight.

How can I see what I’ve been charged?

Overnight funding charges appear as separate transactions on your account and won’t affect your running profit/loss. A statement which contains all deals and associated charges is automatically sent to your registered email address at the end of each day.

How are the charges calculated?

CFDs

Indices

For each day that a cash CFD position is open on a stock index, adjustments are calculated to reflect the effect of interest and dividends (if applicable).

Cost currency is determined by the DFB currency for spread bets and the currency of the underlying asset for CFDs.

LIBOR is calculated according to the currency of the underlying instrument.

Please note that open positions held through 10pm (UK time) on Fridays will be adjusted for three days’ worth of funding to cover the weekend.

Formula:

Number of contracts x value per contract x price x (2.5% admin fee +/- LIBOR%) ÷ 365

* Mini contracts incur a 3% admin fee

* Price = price at 10pm (UK time) + if long - if short

365-day divisor used for the FTSE 100 and other GBP, SGD and ZAR denominated markets.

360-day divisor used for all other markets.

Example:

You’re short two contracts on the US Tech 100

The contract value is $100

The 10pm (UK time) price is 6957

The 1-month US LIBOR rate* is 1.53%

Cost = 2 x $100 x 6957 x (2.5% - 1.53%) ÷ 360

= $1,391,400 x 0.97% ÷ 360

= $37.49 overnight charge

* We use the US LIBOR and the 360-day divisor since you’re trading the US Index in USD

Cost currency is determined by the currency of the underlying asset for CFDs.

LIBOR is calculated according to the currency of the underlying instrument.

Borrow charge: When you are shorting a stock via a cash CFD, you will incur a borrow charge. The borrow charge will be accounted for in a daily cash adjustment applied to your account. The charge varies according to the stock, is notified to us by our brokers or agents and includes a 0.5% administration fee. The borrow charge, and the ability to hold a short position, can be changed at short notice. To determine whether a borrow charge applies and if so, what the charge is, call our dealers in advance of trading.

Shares and ETFs

Please note that open positions held through 10pm (UK time) on Fridays will be adjusted for three days’ worth of funding to cover the weekend.Please note that open positions held through 10pm (UK time) on Fridays will be adjusted for three days’ worth of funding to cover the weekend.

Formula:

Number of contracts x value per contract x price x (2.5%* +/- LIBOR%*) ÷ 365

* Mini contracts charged 3% admin fee

* Price = price at 10pm (UK time) + if long - if short

365-day divisor used for the FTSE 100 and other GBP, SGD and ZAR denominated markets.

360-day divisor used for all other markets.

Example:

You’re long 1500 contracts on Rio Tinto Ltd (Australian stock)

The contract value is AUD 1

The closing price is 83.90

The 1-month AUD LIBOR rate is 1.89%

Cost = 1500 x 1 x 83.90 x (2.5% + 1.89%) ÷ 360

= £125,850 x 4.39%

= AUD 15.35 overnight charge

Forex

For forex and spot metals deals, we charge the tom-next rate plus an admin fee of 0.8%.

What is the tom-next rate? Find out more here.

Please note that forex positions held through Wednesday 10pm (UK time) will incur three days’ worth of funding to cover the settlement of trades over the weekend. This is because FX settles on a T+2 basis. Therefore, when a position is held through Wednesday 10pm (UK time) it’s effectively being held through the weekend as positions can’t be settled until after Friday 10 pm (UK time). Subsequently, holding through Friday will only incur one day’s worth of funding.

The easiest way to work out overnight funding costs on FX pairs is to look up the swap rate on our platform (click here to find out how to do this) and to use the formulas below:

Formula:

Long:

Number of contracts x value of contract x offer swap rate

Short:

Number of contracts x value of contract x bid swap rate

Example:

You’re long one EUR/USD $10 contract

The GBP/USD swap offer is -0.85

1 x $10 x -0.85 = $8.50 debit

What is the base calculation for FX funding?

Formula:

There are three steps to this formula:

  1. Value

Price in points x 0.3% (0.8% for mini contracts) ÷ 360

  1. Swap rate

When going short:

Tom-next rate – value

When going long:

Tom-next rate + value

  1. Cost

Number of contracts x value of contract x swap rate

Example:

You’re short one EUR/USD standard lot

The contract value is $10

The tom-next rate is 0.34 bid/0.39 offer

The closing spot price is 1.0650

Value = 10650 x 0.3% ÷ 360 = 0.08875

Swap rate = 0.34 – 0.08875 = 0.25 (rounded)

Cost = 1 x $10 x 0.25 = $2.50 credit*

* This is a credit since the bid interest rate is lower than the offer rate and you are holding a short position.

Commodities

Prices for commodity cash CFDs are synthetically created using the two most liquid futures contracts. This will result in a natural movement between these two contract prices and will be included in overnight funding adjustments. You’ll then either be debited or credited depending if you’re long or short, and whether the next future contract price is higher or lower.

To find out more on how we price our commodities, please click here

Commodity funding is based on the market cost of carry, plus an admin fee of 2.5% per annum.

Please note that open positions held through 10pm (UK time) on Fridays will be adjusted for three days’ worth of funding to cover the weekend.

Formula:

There are three steps to this formula:

  1. Basis (the daily movement along the futures curve)

(P3 – P2) ÷ (T2 – T1)

T1 = expiry date of the previous front future

T2 = expiry date of the front future

P2 = price of front future

P3 = price of next future

  1. IG charge

Price x 2.5% ÷ 360

  1. Adjustment

Bet size x (basis + IG charge)

Example:

You’re short one $10 contract on Oil – US Crude

T2 – T1 = 31 days

P2 price is 4700

P3 price is 4770
Basis = (4770 – 4700) ÷ 31 = £2.258

IG charge = 4700 x 2.5% ÷ 365 = £0.322

Adjustment = £10 x (£2.258 - £0.322) = £19.36*

* £19.36 will be credited to your account as you were short, and the next future contract was higher than the front contract.

Cryptocurrencies

For bitcoin, the overnight funding rate is 0.0347% (12.5% per annum). For other cryptocurrencies, the overnight funding rate is 0.0556% (20% per annum). Holders of long positions will have the applicable rate debited, while holders of short positions will receive a credit of the applicable rate. Additionally, we charge an admin fee of 0.0208 (7.5% per annum), payable by both long and short position holders.

Formula:

Long position:

Number of contracts x value per contract x price x (IG fee + overnight funding rate)

Short position:

Number of contracts x value per contract x price x (IG fee - overnight funding rate)

Example:

You are short 20 lots of litecoin

The contract value is $1

The current price is 31.26

Cost = (20 x $1 x 31.26) x (0.0208% – 0.0556%)

= $625.20 x -0.0348%

= $21.75 debit

Other markets

Overnight funding for the following instruments is calculated in the same way as for commodities without fixed expiries:

EU Volatility Index, French OAT, German Bobl/Bund/Buxl/Schatz, Italian BTP, Japanese Government Bond, UK Long Gilt, US 2-Year/5-Year/10-Year T-Note, US Dollar Basket, US Treasury Bond, US Ultra Treasury Bond, Volatility Index.

Prices on these markets for cash CFDs are synthetically created using the two most liquid futures contracts. This will result in a natural movement between these two contract prices and will be included in overnight funding adjustments. You’ll then either be debited or credited depending if you’re long or short, and whether the next future contract price is higher or lower.

Funding is based on the market cost of carry, plus an admin fee of 2.5% per annum.

Please note that open positions held through 10pm (UK time) on Fridays will be adjusted for three days’ worth of funding to cover the weekend.

Formula:

There are three steps to this formula:

1. Basis (the daily movement along the futures curve)

(P3 – P2) ÷ (T2 – T1)

T1 = expiry date of the previous front future

T2 = expiry date of the front future

P2 = price of front future

P3 = price of next future

2. IG charge

Price x 2.5% ÷ 360/365

3. Adjustment

Bet size x (basis + IG charge)

365-day divisor used for the FTSE 100 and other GBP, SGD and ZAR denominated markets. This divisor will also be applied to all commodities denominated in CNH.

360-day divisor used for all other markets.

Example:

You’re short 100 contracts on the Volatility Index

The contract value is £100

T2 - T1 = 31 days

P2 price is 15.50

P3 price is 16.50

Basis = (16.50 - 15.50) ÷ 31 = £0.03

IG charge = 15.50 x 2.5% ÷ 365 = £0.001

Adjustment = £100 x (£0.03 - £0.001) = £2.9*

*£2.9 will be credited to your account as you were short, and the next future contract was higher than the front contract.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider.You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.