The need for swaps arises from the specifics of trading in the foreign exchange market. In theory, the seller of a currency must physically deliver it to the buyer on the next trading day. But what happens if a position remains open for several days? To avoid actual physical delivery when holding a position overnight, the position is closed at the end of the trading day and automatically reopened at the current market price the next day. From the trader’s perspective, the position remains unchanged — the only difference is that a swap amount is either credited to or debited from their account, depending on the interest rate differential between the two currencies involved.

A swap is charged or credited when a trading position is rolled over to the next day. Its value depends on the interest rates set by central banks. Since these rates can change over time, swap rates may also fluctuate. To calculate the swap rate for a currency pair, subtract the central bank's interest rate of the sold currency from the interest rate of the purchased currency. On top of this difference, additional markups charged by banks and liquidity providers are included — these are typically deducted from the interest rate differential between the two currencies. If the interest rate of the sold currency is higher than that of the bought currency, the resulting swap will be negative, meaning it will be deducted from the trader’s account.

Trades that are left open between 11:59 PM and 12:00 AM are rolled over to the next day automatically. Important! Banks are closed on Saturday and Sunday, so the swap for both days off is moved to the weekdays. Accordingly, the triple swap rate will be accrued or charged on this day. The triple swap rate day is not the same for different trading instruments and depends on the particular nature of settlements. You can learn more about the day on which the triple swap rate is charged in the stock symbol’s specification on the trading platform.

Yes, swap rates can be either positive or negative. A positive swap means that a certain amount is credited to the trader’s account for holding a position overnight, while a negative swap results in a deduction. Whether a swap is positive or negative depends on the interest rate differential between the two currencies in a pair, as well as additional adjustments applied by liquidity providers and the broker. Even if the interest rate difference is favourable, other costs may still result in a negative swap.

Yes, swap rates are calculated separately for long and short positions and can differ significantly. This is because the interest rate applied depends on which currency is bought and which is sold in the transaction. As a result, a trader may pay a swap when holding a long position and receive a swap when holding a short position on the same currency pair, or vice versa. The exact swap values for long and short positions are specified in the instrument’s contract specifications on the trading platform.