Are these fair charges?

Can someone help me confirm something?

I placed a short NZD/JPY a few weeks back, in the cash market (this is called a rolling trade when you spread bet, as I am) and was charged to hold it short, per day. This was with a company called TDWaterhouse.

At the moment, I am holding a EUR/USD long and getting charged on a daily basis too although this is with a different account - E*Trade.

I guess each broker has its own rules but I was under the impression, longs cost you and shorts earnt you interest?

Can anyone clear this up so I can go to them with a clear argument?

Thanks for your help,

Tom

Usually this has more to do with the interest rates of various ccy's. NZ rates are higher than Japanese, so if you are holding a short position you have to cover th interest spread. Euro rates are lower than US rates, so their it costs you money to go long. (+ whatever other charges your dealer banks decides you should pay.)

This sounds a lot like you're being charged the swap rate, which was described below: The differential between the interest rates.

This isn't based on the typical long/short theory as in equities. The determination of whether or not you get charged the swap is based on the differential.

Remember this: (LONG - SHORT - SPREAD)

So, in your case, the NZD is at 8.0% and the JPY is at 0.50% since you are SHORT the NZD and LONG the JPY, you take (0.5 - 8.0) and you get -7.5% which is the amount of interest you would be CHARGED (since the rate is negative). Now mind you, there is a SPREAD in the rate and that will vary by dealer, but often it's 0.25% so you would be CHARGED -7.75%.

In your EUR/USD, you are LONG the EUR (4.0%) and SHORT the USD (5.25%) Therefore, you would have (4.0 - 5.25) = -1.25% - the spread = -1.5% and that is how much you are CHARGED (since the differential is negative).

On the other hand, if you were LONG the NZD and SHORT the JPY, you would get paid 7.25% (8.0 - 0.5 - 0.25 spread) = 7.25%

I don't know if this is the part you misunderstood or not, but there you have it, my explanation on swaps and what you may be getting charged.

Wouldn't it just be easier to set up an old fashioned carry trade?