Rollovers

In the spot Forex market, trades must be settled in two business days. It means that counter transactions encompassing the same currency pair, for the same amounts, settled on a spot basis, are needed where one transaction closes the position for the "old" value date, and simultaneously opens the position for the new value date. In this case the dealer may charge or pay interest to the client for these position rollovers. As a result funds are subtracted or added to the client's account with open positions. Whether a fee will be charged or a payment made depends upon the short-term interest rates in the countries of the currencies in the pair. For example, you sold 100,000 EUR/USD. It means that you effectively borrowed 100,000 Euro from the dealer against the current interest rate on Euro. You sold Euros and earned a corresponding amount in US dollars, which the dealer is now "holding" for you. The dealer pays you for the US dollars you placed with him at the current interest rate on US dollars. You pay the interest rate that currently can be earned on EUR investments. The difference between these payments is recorded in points on your account. A model schedule can be represented as follows: