Question: How is swap point (overnight interest rate) calculated on OANDA MT4?
Notice
This FAQ has ended its release period. Please check OANDA's latest information and campaign on OANDA's company introduction page.
OANDA - What's now?
We are no longer promoting OANDA. The information regarding to OANDA on the website 'Hercules.Finance' maybe outdated. ref. OANDA
Understand OANDA’s overnight interest/financing fee calculation method, so as to better understand the overnight interest/financing fee or credit financing line and other related potential costs when trading through OANDA.
CFDs on FX, indices and commodities
If at the end of each trading day (5pm Eastern Time), there is an open position on your account, then the position will be considered as an overnight position and will be subject to overnight interest/financing fees or occupy your credit line , As the overnight interest of the position (relative to the margin).
Financing fees are calculated for each position.
For your account, this may be reflected as a fee or credit limit, depending on whether you hold a long/long position or a short/short position.
OANDA’s management fees will also affect your financing fees or credit limit.
Go to OANDA’s Official Website
Funding rates for CFD positions
FX and metal (except copper):
Daily overnight interest (financing fee) or credit limit = position size x applicable overnight interest rate/365.
Indices and commodities (including copper):
Daily overnight interest (financing fee) or credit limit = position value * x applicable overnight interest rate/365.
* Where position value = position size x price at the end of the trading day (5pm Eastern Time).
The overnight rate/financing rate (or “swap rate” for foreign exchange products) varies from financial product to financial product and may change daily.
These interest rates are quoted at annualized rates.
There are two quotations for each product: buy/long quotations, and sell/short quotations.
A negative overnight interest rate/financing rate will deduct a fee from your account, and a positive overnight interest rate/financing rate will be credited to your account with a credit limit.
How OANDA calculates funding rates
The following table shows how overnight interest/financing costs are calculated for foreign exchange, precious metals and index CFDs (contracts for difference).
For FX and metals (excluding copper)
Funding rates (long/buy positions)
The interest rate is based on the mixed tomorrow/next day (T/N) swap interest rate of each underlying asset liquidity provider, adjusted according to the management fee of the specific instrument, and expressed at an annual rate.
On the overnight interest/financing fee page, you can select the financial product you want to trade, and then the system will calculate the annualized financing interest rate (including its management fee) and the expected daily overnight interest/financing fee based on the current interest rate.
In addition, you can also view historical overnight interest/financing interest rates.
Funding rates (short/sell positions)
The interest rate is based on the mixed tomorrow/next day (T/N) swap interest rate of each underlying asset liquidity provider, adjusted according to the management fee of the specific instrument, and expressed at an annual rate.
On the overnight interest/financing fee page, you can select the financial product you want to trade, and then the system will calculate the annualized financing interest rate (including its management fee) and the expected daily overnight interest/financing fee based on the current interest rate.
In addition, you can also view historical overnight interest/financing interest rates.
Go to OANDA’s Official Website
For Indices
Funding rates (long/buy positions)
The management fee at a rate of 2.5% plus the relevant* inter-bank lending rate is expressed as an annualized interest rate.
Expressed as a negative interest rate and therefore a cost.
*The interest rate currency is the quote currency of the financial product as shown in the table below.
On the overnight interest/financing fee page, you can select the financial instrument you want to trade, and then the system will calculate the annualized overnight interest/financing interest rate (including management fee) and the expected daily overnight interest/financing fee based on the current interest rate.
In addition, you can also view historical overnight interest rates/financing interest rates.
If the relevant* one-month interbank lending rate is higher than OANDA’s 2.5% management fee, the interest rate used will be the annualized difference between the two.
Expressed at a positive interest rate, so it is a credit limit.
Funding rates (short/sell positions)
If the relevant* Interbank Offered Rate is lower than OANDA’s 2.5% management fee, then the interest rate used will be the annualized difference between the two.
Expressed as a negative interest rate and therefore a cost.
*The interest rate currency is the quote currency of the financial product as shown in the table below.
On the overnight interest/financing fee page, you can select the financial instrument you want to trade, and then the system will calculate the annualized overnight interest/financing interest rate (including management fee) and the expected daily overnight interest/financing fee based on the current interest rate.
In addition, you can also view historical overnight interest rates/financing interest rates.
Financing costs affected by holidays and weekends
The settlement date varies by asset class.
The settlement date of foreign exchange and metal (except copper) transactions is usually the second business day (T+2) after the transaction day, which means that weekend financing will be calculated two days earlier on Wednesday (three times the usual daily interest rate).
Similarly, this is also affected by public holidays.
Please note that the settlement date for USD/CAD is T+1, so the three-day financing starts on Thursday.
Indexes and commodities (including copper) usually take weekend financing into account when trading on Friday (three times the usual daily interest rate), of course, similarly, this is also affected by public holidays.
Therefore, the actual overnight interest rate/financing rate on a specific day may reflect the cost of more than one day.
No overnight interest/financing fees will be charged to customer accounts or credited to the credit limit on weekends.
Please refer to the FAQ for examples of overnight interest/financing fees for CFD positions.
Go to OANDA’s Official Website
CFDs on commodities (plus copper)
OANDA’s commodity (including copper) CFDs have no expiry date.
To this end, OANDA generates its commodity CFD prices by applying a premium or discount rate (called the “base interest rate”) to the price of the underlying effective futures contract.
When the futures contract is about to expire, the benchmark interest rate of the new contract will be calculated using the price of the upcoming contract and the new contract.
After the benchmark interest rate is adopted, because the old futures contract is about to expire, the CFD price will converge to the price of the new active futures contract, and the CFD price will be adjusted up and down.
The direction of the adjustment depends on the difference between the price of the new active futures contract and the price of the CFD.
For example, if the price of a new futures contract is higher than the price of the CFD, the benchmark interest rate will increase the price of the CFD to make it converge to the price of the new futures contract.
At the end of the trading day (5 p.m. Eastern Time), the financing interest rate applicable to commodities is designed to offset the price changes caused by this pricing method, so it may be a credit or a debit, depending on whether you are a long or short position.
Whether prices are falling or rising, and the impact of additional management fees.
Financing charges or credits are calculated as follows:
Overnight interest / financing fee or credit limit = position size x applicable overnight interest rate / financing interest rate x [transaction period (days) / 365] x account currency exchange rate.
For CFDs on commodities (including copper), OANDA overnight interest/financing costs are the benchmark interest rate plus a certain percentage of management fees.
For long positions, your account will be deducted from the benchmark interest rate plus a 2.5% management fee.
For short positions, your account will be credited to the benchmark interest rate minus a 2.5% management fee (if the benchmark interest rate is lower than the management fee, a fee will be charged).
