Overnight trade financing
What is overnight financing?
Overnight financing is a fee that you pay to hold a trading position overnight on leveraged trades, it is essentially an interest payment to cover the cost of the leverage that you use overnight.
Overnight financing charges are applied to positions that have no set expiry date. Financing charges reflect the cost of borrowing or lending the underlying asset and are charged at the relevant interest rate benchmark +/-2.5% on the total value of the position. These charges are competitive in order to keep the cost of trading low.
Which rates will be used?
|Country||Financing on long positions||Financing on short positions|
|UK||SONIA +2.5%||SONIA -2.5%|
|US||SOFR +2.5%||SOFR -2.5%|
|EU||€STR +2.5%||€STR -2.5%|
|Australia||Deposit +2.5%||Deposit -2.5%|
|Other international||Contact Client Management||Contact Client Management|
When does the charge apply?
The daily financing fee will be applied to your account each day that you hold an open position (including over the weekend).
You will not pay a finance charge on futures trades as they already have the cost of carry built into the spread.
Financing on long positions
You will pay an overnight financing charge of the relevant rate plus 2.5%.
In this example, you buy 1000 CFDs on UK Company ABC at 435p. The trade is doing well and the price has increased to 450p at the end of the day but it is still some way from your target price of 480. You decide to keep the trade open overnight.
As it is a long position, you will pay an overnight financing fee to keep the position open, this fee consists of SONIA +2.5% . In this example, the current rate of SONIA is 3%.
The overnight financing is then calculated as:
(1,000 CFDs x 450 price) x (SONIA +2.5%)) / 365
£4,500 x 5.5% / 365 = 68p
68p will be debited to your account.
*Note: US and EU stocks are divisible by 360 rather than 365.
Financing on a short CFD position
On short positions you may receive an overnight financing fee of the relevant rate minus 2.5%. However, please note there may be instances when a financing fee is charged to you, when the base rate is at an exceptionally low rate.
For example, you sell 1000 CFDs on UK Company XYZ at 500p. The price falls to 450p at the end of the day, but it is still some way from your target price of 420. You decide to keep the trade open overnight.
As it is a short position, you will receive an overnight financing fee to keep the position open. The SONIA rate is currently 3%.
((1,000 x 450) x (SONIA -2.5%)) / 365
£4,500 x 0.5% / 365 = 6p
6p will be credited to your account.
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