On Wednesday, why do they charge a triple swap rate?

[amazingjuly 67]

I recently discovered that Pepperstone and Thinkforex (now Thinkmarket) charge their clients a triple swap rate on Wednesdays for weekend clearance. When asked what would happen if I closed the trades the following day, i.e. Thursday, would they return the extra two days swap to me? The answer is a depressing 'NO.'
Could someone please enlighten me as to whether this is industry standard practice or just some astute brokers finding a way to extract more money from their clients while going unnoticed?

[MissCrystal 40]

4 minutes ago, amazingjuly said:

I recently discovered that Pepperstone and Thinkforex (now Thinkmarket) charge their clients a triple swap rate on Wednesdays for weekend clearance. When asked what would happen if I closed the trades the following day, i.e. Thursday, would they return the extra two days swap to me? The answer is a depressing 'NO.'
Could someone please enlighten me as to whether this is industry standard practice or just some astute brokers finding a way to extract more money from their clients while going unnoticed?

That's something that all brokers do. The reason they give out is because forex transactions take two days to settle. So, if you held a position open after 5:00 PM EST on Wednesday, it won't settle until after Friday, and then they add two extra days of swap to cover the weekend. So, unless you have a positive carry, NEVER leave your positions open after Wednesday unless you are certain that the potential profit will completely compensate for the swap.

[amazingjuly 67]

thanks for clarifying

[mariaxty 11]

Bear in mind that it works in both directions. If you are long the currency in the higher interest rate pair (for example, long TRY/JPY or short USD/ZAR), you earn the swap rather than paying it. Carry trading is the strategy of keeping a trade open in order to earn the swap, and we recently discussed it.

The swap rate (AKA rollover interest) is applied to all open trades at 5 p.m. New York Time, regardless of the duration of the trades. That means that if you buy TRY/JPY at 4:59 PM on Wednesday and close your trade at 5:01 PM, you can earn the full three days' rollover interest, despite the fact that your trade was only open for two minutes.

On the other hand, if you are a day trader who is not concerned with swaps, you can buy USD/ZAR at 5:01 PM Tuesday and close your trade at 4:59 PM Wednesday without incurring any rollover interest, despite the fact that your trade was open for 23 hours and 58 minutes.

Another consideration is the effect of holidays on the normal swap schedule. If a three-day weekend is approaching, you may earn or pay four days' interest or more on trades opened at 5 p.m. on Wednesday.

[ZariaRobo 7]

Indeed, you should avoid carrying a position overnight NOT just on Wednesday, but on ALL DAYS STARTING THURSDAY AND FRIDAY. Essentially, any period during which the position will settle over the weekend will result in higher swap rates. Thus, if you hold an overnight position, you are only charged for two swap days on Monday and Tuesday. And, of course, if the following Monday is a holiday, the situation becomes even worse; you will be charged FIVE days of interest if the carry is negative.

[amazingjuly 67]

2 minutes ago, mariaxty said:

Bear in mind that it works in both directions. If you are long the currency in the higher interest rate pair (for example, long TRY/JPY or short USD/ZAR), you earn the swap rather than paying it. Carry trading is the strategy of keeping a trade open in order to earn the swap, and we recently discussed it.

The swap rate (AKA rollover interest) is applied to all open trades at 5 p.m. New York Time, regardless of the duration of the trades. That means that if you buy TRY/JPY at 4:59 PM on Wednesday and close your trade at 5:01 PM, you can earn the full three days' rollover interest, despite the fact that your trade was only open for two minutes.

On the other hand, if you are a day trader who is not concerned with swaps, you can buy USD/ZAR at 5:01 PM Tuesday and close your trade at 4:59 PM Wednesday without incurring any rollover interest, despite the fact that your trade was open for 23 hours and 58 minutes.

Another consideration is the effect of holidays on the normal swap schedule. If a three-day weekend is approaching, you may earn or pay four days' interest or more on trades opened at 5 p.m. on Wednesday.

So, I believe the swap only applies to the pair that is on vacation on Monday? Those exotic pairs impose such a wide spread that short-term carry trades are unprofitable. Major pairs, on the other hand, typically have a negative swap for both buy and sell trades...

[wekun 63]

triple swap is meant to cover for weekends..

my broker charges it on Friday midnight after close

brokers who triple charge on wednesday are being cheeky

[ReatrdGeam 54]

5 minutes ago, wekun said:

triple swap is meant to cover for weekends..

my broker charges it on Friday midnight after close

brokers who triple charge on wednesday are being cheeky

Wekun, that is not the case.

On Wednesday, forex brokers apply (it's not always a charge, because you can also earn) triple rollover interest, because that's how it's applied by the banks that provide liquidity to the FX market. This is due to the fact that spot forex trades have a two-day settlement period. On Wednesday, a spot FX trade from Monday settles. On Thursday, a trade from Tuesday is settled.

A Wednesday trade settles on Friday, but a Thursday trade settles on... the following Monday. Because banks are closed on Saturday and Sunday, the trade must be completed over the weekend. Because the new 24-hour trading day (Thursday) in the global FX market begins at 5 p.m. New York Time on Wednesday, triple rollover interest is applied to FX trades open at that time.

It's odd that your broker doesn't use interest in the same way that banks and other brokers do. If nothing else, it may present you with an arbitrage opportunity. Could you, for example, go short USD/ZAR and EUR/TRY with a forex broker that allows you to earn triple rollover at 5 p.m. on Wednesday, and then go long those same pairs with your current broker, which may charge you only one day's worth of rollover interest for your hedged positions?

[Summon 33]

Hello, I'm new to CFDs... could you please explain why the swap charge has become so high? I only go 2units long... I trade on Thinkmarket.

[Charligreek 31]

You better off trading real stocks 😀