foreign exchange trading The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all asp ...

(FX), a rollover is the action taking place at end of day, where all open positions with

value date In finance, value date is the date when the value of an asset that fluctuates in price is determined. The value date is used when there is a possibility for discrepancies due to differences in the timing of asset valuation. It usually applies to ...

equals SPOT, will be rolled over to the next

business day A business day means any day except any Saturday, any Sunday, or any day which is a legal holiday or any day on which banking institutions are authorized or required by law or other governmental action to close. The definition of a business day ...

. This happens since in FX trading the trader doesn't want to actually buy the traded currencies but to continue to trade until position is closed. For example, on Monday all position with value date of Wednesday (in case of T+2) will be rolled over and the value date will be updated for Thursday. Position with value date of Friday will be updated with value date of next Monday. Trading platforms offer rollovers but the process involves a rollover interest fee which is calculated according to the difference between the interest rates of the traded currencies. If the interest rate on the trader's

long Long may refer to: Measurement * Long, characteristic of something of great duration * Long, characteristic of something of great length * Longitude (abbreviation: long.), a geographic coordinate * Longa (music), note value in early music mens ...

position is higher than the rate on the short position, the trader receives the interest. If the interest rate on the trader's short position is higher than the rate on the long position, then the trader pays the interest. For weekends and holidays, the rollover is multiplied by the number of days of rollover.

Calculation

The calculation is based on the difference between base and quote currencies. Thus, it is needed to subtract the

interest rate An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, ...

of the base currency from the quote currency’s interest rate. Then, it is needed to divide the result by 365 times the base exchange rate. However, usually, the rollover is shown in the

trading platform In finance, an electronic trading platform also known as an online trading platform, is a computer software program that can be used to place orders for financial products over a network with a financial intermediary. Various financial products c ...

or on the broker’s website, which frees the trader from unnecessary calculations. Rollover is also known as a swap fee. Thus, to check the rollover, it is needed to find a swap (long and short) on the broker’s website or in the trading platform.

References

Sources

* http://thismatter.com/money/forex/rollovers.htm Foreign exchange market Settlement (finance) {{finance-stub

Calculation

See also

References

Sources