Swap fee
Family IV · Costs
Not to be confused with swap, forex swap, currency conversion fee.
Swap fee is the amount a broker debits or credits when a leveraged position is held overnight, reflecting the interest-rate differential between the two currencies involved. It is not a one-off commission but a recurring cost or income that accrues for each day the position remains open. The exact rate and the time of the daily rollover vary by broker and instrument.
How the swap fee is calculated
The swap fee is derived from the forex swap points quoted by the broker, which in turn reflect the interest-rate gap between the two currencies. Brokers add a markup to the interbank rate, so the fee charged on a long position is usually higher than the credit received on the equivalent short position. The charge is applied automatically at the broker's daily rollover time, typically late afternoon or evening in the broker's server time zone.
Worked example
What varies by broker and instrument
The swap rate, the rollover time and the number of days charged for a Wednesday rollover (often three days to cover the weekend) are set by the broker and can differ between account types. Some brokers offer swap-free accounts for certain instruments, while others apply a separate administration fee instead. The rate is also affected by the liquidity of the currency pair and prevailing central-bank policy rates.
Often confused with
- swap
- A swap is the underlying interest-rate exchange between two parties, while a swap fee is the retail charge a broker applies to a trader's overnight position; the visible sign is that a swap appears as a contract between institutions, whereas a swap fee appears as a line item on a trading statement.
- forex swap
- A forex swap is the specific instrument or rolled-over spot transaction used to manage currency exposure, whereas a swap fee is the cost or credit passed to the retail trader; the visible sign is that a forex swap is quoted in swap points or as a forward contract, while a swap fee is shown in account currency.
- currency conversion fee
- A currency conversion fee is charged when a broker converts realised profits, losses or deposits from one currency to another, while a swap fee is charged for holding a leveraged position overnight; the visible sign is that a conversion fee appears only on transactions involving a currency exchange, whereas a swap fee appears on any position held past the daily rollover.