Why is swap tripled on Wednesday and not Friday ? | Forex Factory

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Why is swap tripled on Wednesday and not Friday ?

  • #1
  • First Post: Oct 26, 2006 4:54pm Oct 26, 2006 4:54pm
Wouldn't it make more sense to triple the swap on Friday when its obvious that if you hold the position to Friday close you have to carry it over the weekend. Just seems to me like a way for them to gouge us since most people don't carry positions over the weekend and this way they can make the money off us anyway. I realize swap is minimal but for them multiply it x number of times and its quite the money maker I'm sure, especially since the net swap is to our disadvantage. Or am I missing something. This just struck me as odd and wondered if anyone had any details why this is done this way. thx, just thought I'd vent a little today
  • #2
  • Oct 26, 2006 5:03pm Oct 26, 2006 5:03pm
The reason you get 3x the interest on wednesday is that the spot forex market is a 3 day settlement so you pick up the weekend interest.
Therefore what??
  • #3
  • Oct 26, 2006 5:04pm Oct 26, 2006 5:04pm
A spot currency contract is the equivelant of a 2 day futures contract. This means that if rollover didn't seamlessly occur you would you have to sell(buy) your existing contract and buy(sell) your new contract every 2 days or face delivery of a big pile of money. Rollovers generally occur around 5 pm EST because that is consdiered the end of the US session and the beginning of the Asian session. Triple interest is paid on wednesday at 5 PM EST because it covers the weekend markets when brokerages and banks are not open. Friday at 5 PM is two days later than Wednesday. This offsets the trades that would have occurred on the weekend.
  • #4
  • Oct 26, 2006 5:59pm Oct 26, 2006 5:59pm
Quoting philmcgrew
A spot currency contract is the equivelant of a 2 day futures contract. This means that if rollover didn't seamlessly occur you would you have to sell(buy) your existing contract and buy(sell) your new contract every 2 days or face delivery of a big pile of money. Rollovers generally occur around 5 pm EST because that is consdiered the end of the US session and the beginning of the Asian session. Triple interest is paid on wednesday at 5 PM EST because it covers the weekend markets when brokerages and banks are not open. Friday at 5 PM is two days later than Wednesday. This offsets the trades that would have occurred on the weekend.
See, I knew there was a reason. Thanks for the explanation
  • #5
  • Oct 27, 2006 9:26am Oct 27, 2006 9:26am
Quoting jhathawa
Wouldn't it make more sense to triple the swap on Friday when its obvious that if you hold the position to Friday close you have to carry it over the weekend. Just seems to me like a way for them to gouge us since most people don't carry positions over the weekend and this way they can make the money off us anyway. I realize swap is minimal but for them multiply it x number of times and its quite the money maker I'm sure, especially since the net swap is to our disadvantage. Or am I missing something. This just struck me as odd and wondered if anyone had any details why this is done this way. thx, just thought I'd vent a little today
It's not a way to take money out of traders, because if you think about it, if you are long the currency with the highest interest rate, you are actually getting money out of their pockets...


Thanks,

Nader
  • #6
  • Last Post: Oct 27, 2006 9:45am Oct 27, 2006 9:45am
You really have to check with your broker. Some will charge you interest but, when it is owed to you, they keep it for themselves. This is common on smaller accounts. Don't assume that they owe you anything. Also, very few actually give you all the interest that you're due!

Here are the true rates converted to pips: http://www.mataf.net/en/analysis-interest_rates.htm
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