Rollover

Family IV · Costs

Not to be confused with rollover interest rate, rollover time.

Rollover is the operational and financial adjustment applied when a spot foreign exchange or contract-for-difference position is held past its daily cut-off and its settlement is deferred to the next business day. It is not a single fee but the net result of two interest components: the rate applicable to the currency bought and the rate applicable to the currency sold. Because those rates differ, the resulting amount can be a debit or a credit to the account.^[1]

Mechanics and calculation

In spot FX, a trade normally settles two business days after the trade date (T+2). Holding the position beyond the daily rollover cut-off requires the broker or counterparty to roll the value date forward. This is done by closing the original position at the prevailing rate and simultaneously opening an equivalent position for the next value date. The difference between the two rates is the rollover interest rate, often expressed in points or pips.

The net amount is calculated from the interest rate differential between the two currencies in the pair, adjusted by the broker's markup. The formula for a long position in the base currency is:

Net rollover = (Notional × (Base interest rate − Quote interest rate) / 360 or 365) ± Broker markup

For a short position, the sign of the differential reverses. The exact day-count convention, the applicable benchmark rates and the size of any markup are set by the broker and can vary by instrument, account type and jurisdiction.

Worked example

A trader holds one standard lot (100,000 units) of AUD/USD long over the daily rollover cut-off. The broker's applicable AUD interest rate is 4.00% and the USD rate is 5.00%, with a broker markup of 0.50% applied against the trader. Assume a 360-day year.

Rollover on a long AUD/USD position

Notional100,000 AUD—

Interest differential4.00% − 5.00% = −1.00%−1.00%

Broker markup0.50% against trader−0.50%

Net annual rate−1.00% − 0.50%−1.50%

Daily rollover100,000 × −1.50% / 360−4.17 AUD (debit)

The account is debited approximately 4.17 AUD for that day. Had the differential been positive after markup, the same calculation would produce a credit.

Triple rollover and timing

Because spot FX settles on a T+2 basis, a position held over a Wednesday cut-off is typically rolled to the following Monday to account for the weekend. This results in a triple rollover, where the charge or credit is three times the normal daily amount. Some brokers apply triple rollover on a different weekday depending on the instrument and holiday calendar.

The exact rollover time is set by the broker and usually coincides with the daily maintenance period, but it can vary with daylight saving changes and market holidays. Positions open at that moment are subject to the adjustment; positions closed before it are not.

Often confused with

rollover interest rate: The rollover interest rate is the annualised percentage differential used to compute the charge or credit, whereas rollover is the broader process and the resulting amount applied to the position; the visible sign is that the rate is quoted as a percentage or in points, while the rollover itself appears as a cash debit or credit on the account statement.
rollover time: Rollover time is the specific daily cut-off at which positions are rolled and the charge or credit is applied, while rollover is the adjustment itself; the visible sign is that the time is expressed as a clock time in a stated time zone, whereas the rollover is expressed as a monetary amount.

References

↑ Policy rate publications of the relevant central banks. Overnight financing follows the interest-rate differential between the two currencies, plus the broker's own markup, so the figure is not fixed.

Family: IV · Costs · Index A–Z