Product Overview

A swap charge is determined based on the interest rates of the countries involved in each currency pair and whether the position is short or long. In any one currency pair, the interest is paid on the currency sold and received on the currency bought.

Swap charges are released daily by the financial institutions we work with and are calculated based on prevailing market conditions. Each currency pair has its own swap charge and is measured on a standard size of 1.0 lot (100,000 base units).

Cost of carry and dividends make up the overnight credits/debits. The value of these two variables is independent of one another.

The overall credit/debit that is applied to your account will depend on the size of the open trade.

f = Overnight finance charges based on trade size
p = Closing price as determined by SGT
r = Relevant LIBOR rate +/- SGT margin for long or short positions
d = Number of days, i.e., 365 for GBP products and 360 for all others

And is calculated as follows: f = (s x p x r) / d

Example:

• Client is long 10 lots of USA100.
• Total finance charge is -0.56 (as displayed in the market watch window).
• Client is a holder of this LONG position through 17:00 (New York Time, 00:00 SGT MT4 server time), there will be a charge of ($0.56 x 10) $5.60 for that trading day.

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Applicable to most cash indices, dividend payments will be applied as debit/credit along with the rollover to your open positions. Adjustments will apply on the eve of the ex-dividend date of the constituent members of the relevant Index. The adjustment will appear as part of the roll over debit/credit.

When an equity goes ex-dividend, the price of that equity theoretically decreases by the dividend amount. In practice, this does not always happen as there are many market forces affecting an equity price. The amount of points an index cash CFD drops by is dependent on the weighting of the equity within the index. If more than one constituent equity of an index CFD goes ex-dividend on the same day, the amount of points each equity will theoretically cause the index to drop by is added together to calculate the total amount of dividend points or ‘drop points’.

These constituent stocks of an index will periodically pay dividends to shareholders, causing a drop in that stock’s price and impacting the overall value of the index. This price drop of the index will affect the PnL on an open index CFD trade to compensate this, and there will be a credit or debit that will be included in the cost of carry (swap) that is made at 00:00 server time.

If you have a long index position, your PnL will be negatively affected, so you will receive a credit in the same amount as the dividend adjustment.

If you have a short index position, your PnL will be positively affected, so you will receive a debit in the same amount as the dividend adjustment.

It’s an important to remember that index traders do not profit or lose from these adjustments. It is a zero-sum situation where any PnL change has a corresponding debit or credit to compensate. Please note, as dividends are combined with normal financing adjustments, the swap will not be the same as the dividend only.

Example:
You have a buy position on the USA500 contract of 10 lots. The next trading day, multiple companies go ex-dividend resulting in a 20-point drop in the USA500 at the open. The swap on this position will be credited $200 (20 points x $10 per point exposure).

The USA500 will open 20 points lower than it would have without the adjustment. As a result, the PnL on the buy position is $200 worse off, which was compensated for by the swap credit you received.
Where an index is a Total Return Index, dividend payments will not be credited/debited.

An example of a total return index is the DAX 30 where the cash disbursements are reinvested into the index.

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