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Financing
Financing is charged or credited on positions that are carried or held overnight.
On short positions you will be credited, whereas on long positions you will debited. The Financing Adjustment for Shares and Index positions are based on a calculation of the daily applicable rate of interest for the notional value of your position. For CFDs the rate will varydepending on the notional value of the position and is calculated as follows:
- UK Stocks / Index: Total Contract Value x LIBOR +/- 3% /365
- US Stocks / Index: Total Contract Value x FFER (Federal Funds Effective Rate) +/- 3% /360
- EU Stocks / Index: Total Contract Value x EONIA (European Overnight Index Average) +/- 3% /360
Example:
Take an example of the 2000 long position of VOD. The ‘Mark to market’ price (closing price) was 140.25. The notional total value of the position is 2000 X £1.4025 = £2,805 (2000 X 1.4025 = 2805). If you were to borrow £2805 from a bank for one night, you would be charged one nights’ interest, which is effectively what we will do.
We base our interest rates on an applicable rate, depending on the trade’s currency.
- LIBOR, London Interbank Offer Rate – GBP
- FFER, Federal Funds Effective rate – USD
- EONIA, European Overnight Index rate – EUR
- TOIS, Swiss Tom/Next Indexed Swap – CHF
- RBA36, Reserve Bank of Australia rate – AUD
- NZOCR, New Zealand Official rate – NZD
- TONAR, Tokyo Overnight Average rate – JPY
- HIBOR, Hong Kong Interbank Offered rate – HKD
- SIBOR, Singapore Interbank Offered rate – SGD
At this point we will either add (for a long position) or subtract (for a short position) a percentage of the applicable rate.
Therefore if we assume that LIBOR (London Interbank Rate) is 4.25%, then the interest payable overnight will be £0.56p, (2,805 * 7.25% / 365 days).
This charge will be shown in your statement under the heading ‘CFD Position Summary’ and is shown on the row ‘Interest’.
The actual interest rates used will be displayed on the same row. This way you can compare the cost of financing any of our trades. A further benefit of this method is that if you placed a short trade on Vodafone you would receive the benefit of the finacing, i.e. you would receive daily interest.
This is because technically you are lending the funds to us, and therefore we owe interest to you for this transaction. This interest is credited to your account whenever the position is rolled over and is displayed on the daily statement.
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