Why is overnight funding charged and how is it calculated?

Cost currency is determined by the currency of the underlying asset for CFDs.

Interest rate benchmark is calculated according to the currency of the underlying instrument.

Borrow charge: When you are shorting a stock via a cash CFD, you will incur a borrow charge. The borrow charge will be accounted for in a daily cash adjustment applied to your account. The charge varies according to the stock, is notified to us by our brokers or agents and includes a 3% administration fee. The borrow charge, and the ability to hold a short position, can be changed at short notice. To determine whether a borrow charge applies and if so, what the charge is, call our dealers in advance of trading.

Please note that open positions held through 11pm (Swiss time) on Fridays will be adjusted for three days’ worth of funding to cover the weekend.

• Formula (CFD)

Number of contracts x value per contract x price x (3%* admin fee +/- relevant interest rate benchmark% ÷ 365)

* Mini contracts charged 3% admin fee

* Price = price at 11pm (Swiss time) + if long - if short
365-day divisor used for the FTSE 100 and other GBP, SGD and ZAR denominated markets.
360-day divisor used for all other markets.

• Example

You’re long 1500 contracts on Rio Tinto Ltd (Australian stock)
The contract value is AUD 1
The closing price is 83.90
The 1-month AUD LIBOR rate is 1.89%
Cost = 1500 x 1 x 83.90 x (3.0%+1.89%)/360
= 125 850 AUD x 4.89% /360
= 17.09 AUD

For forex and spot metals deals, we charge the tom-next rate plus an admin fee of 0.8%.

What is the tom-next rate? Find out more here.

Please note that forex positions held through Wednesday 11pm (Swiss time) will incur three days’ worth of funding to cover the settlement of trades over the weekend. This is because FX settles on a T+2 basis. Therefore, when a position is held through Wednesday 11pm (Swiss time) it's effectively being held through the weekend as positions can't be settled until after Friday 11pm (Swiss time). Subsequently, holding through Friday will only incur one day's worth of funding.

The easiest way to work out overnight funding costs on FX pairs is to look up the swap rate on our platform (click here to find out how to do this) and to use the formulas below:

Prices for commodity cash CFDs are synthetically created using the two most liquid futures contracts. This will result in a natural movement between these two contract prices and will be included in overnight funding adjustments. You’ll then either be debited or credited depending if you’re long or short, and whether the next future contract price is higher or lower.

To find out more on how we price our commodities, please click here.

Commodity funding is based on the market cost of carry, plus an admin fee of 3% per annum.

Please note that open positions held through 11pm (Swiss time) on Fridays will be adjusted for three days’ worth of funding to cover the weekend.

• Formula (CFD)

There are three steps to this formula:

1. Basis (the daily movement along the futures curve)
(P3 – P2) ÷ (T2 – T1)

T1 = expiry date of the previous front future
T2 = expiry date of the front future
P2 = price of front future
P3 = price of next future

2. IG Bank charge
Price x 3% ÷ 360

3. Adjustment
Amount of contracts x value of the contract x (basis + IG Bank charge)

• Example

You’re short one €10 contract on Oil – US Crude
T2 – T1 = 31 days
P2 price is 4700
P3 price is 4770
Basis = (4770 – 4700) ÷ 31 = €2.258
IG Bank charge = 4700 x 3%/365=0.386
Adjustment = 10 EUR x (2.258 EUR - 0.386 EUR) = 18.72 EUR

*18.72 EUR will be credited to your account as you were short, and the next future contract was higher than the front contract.

Overnight funding for the following instruments is calculated in the same way as for commodities without fixed expiries:

EU Volatility Index, French OAT, German Bobl/Bund/Buxl/Schatz, Italian BTP, Japanese Government Bond, UK Long Gilt, US 2-Year/5-Year/10-Year T-Note, US Dollar Basket, US Treasury Bond, US Ultra Treasury Bond, Volatility Index.

Prices on these markets for cash CFDs are synthetically created using the two most liquid futures contracts. This will result in a natural movement between these two contract prices and will be included in overnight funding adjustments. You’ll then either be debited or credited depending if you’re long or short, and whether the next future contract price is higher or lower.

Funding is based on the market cost of carry, plus an admin fee of 3% per annum.

Please note that open positions held through 11pm (Swiss time) on Fridays will be adjusted for three days’ worth of funding to cover the weekend.

• Formula (CFD)

There are three steps to this formula:

1. Basis (the daily movement along the futures curve)
(P3 – P2) ÷ (T2 – T1)

T1 = expiry date of the previous front future
T2 = expiry date of the front future
P2 = price of front future
P3 = price of next future

2. IG Bank charge
Price x 3% ÷ 360/365

3. Adjustment
Number of contracts x value per contract x (basis + IG Bank charge)

365-day divisor used for the FTSE 100 and other GBP, SGD and ZAR denominated markets. This divisor will also be applied to all commodities denominated in CNH.
360-day divisor used for all other markets.

• Example

You’re short 100 contracts on the Volatility Index
The contract value is €100
T2 - T1 = 31 days
P2 price is 15.50
P3 price is 16.50
Basis = (16.50 - 15.50) ÷ 31 = €0.03
IG Bank charge = 15.50 x 3.0%/365 = 0.001 EUR
Adjustment = 100 EUR * (0.03 EUR - 0.001 EUR) = 2.90 EUR

* 2.90 EUR will be credited to your account as you were short, and the next future contract was higher than the front contract.