Guide to Spread Betting Rolling Markets, Daily Charges & Dividend Adjustments

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Financial Spreads: Spread Betting and CFD Trading

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Guide to Rolling Spread Betting Markets

What is a Rolling Market?

What is Overnight Financing?

Spread betting, CFDs and margined forex trades are leveraged and therefore when you buy (go long), you are effectively borrowing from us. Likewise, under normal market conditions, when you sell (go short) you are effectively lending to us.

Therefore we charge interest (overnight financing fee) on the value of rolling positions that are kept open overnight.

Our financing fee is based on the relevant interbank lending rate.

We keep our financing rate low and only charge interest at the Relevant Interbank Rate (RIR) + 2.5% for long positions.

E.g. in the UK, the RIR is the LIBOR rate, so if you go long of the UK 100 index we only charge interest at LIBOR + 2.5%.

Under normal market conditions, we add a small credit to your account of Relevant Interbank Rate (RIR) - 2.5% for short positions. Also see 'What Happens When Relevant Interbank Rates are Very Low'.

What Happens When Interbank Rates are Very Low

If you go short, we are effectively borrowing from you and under normal market conditions the RIR is greater than 2.5%.

If the RIR, e.g. LIBOR, is greater than 2.5% then we would credit your account with LIBOR - 2.5%.

When the RIR is below 2.5%, as many RIRs currently are, clients are charged a small fee to hold an open short position overnight. This fee is charged at 2.5% - RIR.

Which Trades Are Subject to Overnight Financing?

Overnight financing only applies to Rolling trades, i.e. Rolling Cash and Rolling Spot markets.

Overnight financing does not apply to Futures trades because the financing cost is already incorporated into the spread.

When is the Overnight Financing Charged?

Overnight financing is typically charged to any positions still open at 10pm London time.

Relevant Interbank Rate (RIR) for Shares, Stock Indices and Commodities

For shares, stock indices and commodities, the RIR is normally the base rate of the country of the relevant market. E.g., for:

Relevant Interbank Rate (RIR) for Forex Markets

With forex trades, the RIR is calculated as the funding rate of the second currency minus the funding rate of the first currency.

E.g. with GBP/USD, the first currency is the pound and the second is the US dollar. So if the US rates were 0.1% and UK rates were 0.7% then the RIR for GPB/USD would be 0.1% - 0.7% = -0.6% (a negative differential).

The rates used within these examples are not necessarily representative of current rates. However, if the funding rates were: Then the RIR of the following forex pairs would be calculated as:

FX PairRIRCalculation
EUR/GBP0.65%(0.7% - 0.05%)
GBP/EUR-0.65%(0.05% - 0.7%)
EUR/USD0.05%(0.1% - 0.05%)
GBP/USD-0.60%(0.1% - 0.7%)

How to Calculate the Overnight Financing Fee

We use the following calculation for all rolling markets.

Overnight Financing = [(Closing Price / Unit Risk) x Stake x i] / 365

Overnight Financing Calculation

The following example is continued from our Benefits and Risks of Spread Betting page where an investor has bought our Lloyds Bank rolling cash market with a £100/penny stake and kept the trade open for 30 days.

In this example the trade is opened at 140.1p and is closed at 199.9p.

Overnight financing is calculated and charged for each night that the trade is kept open. For this example, let's assume that the average closing price over the 30 days is 170.1p

Overnight Financing Example - UK Equities

Trade Buy
Market Lloyds Bank Rolling Cash
Stake £100/penny
Unit Risk 1p
Applicable Interest Rate (i) 3.2% = Libor + 2.5% = 0.7% + 2.5%
Days Trade Kept Open 30
Average Closing Price 170.1p


A £100 per penny buy of the Lloyds Bank rolling market which has a closing price of 170.10p would be equal to a market exposure of £17,010.

Overnight Financing = [(Closing Price / Unit Risk) x Stake x i] / 365
= [(170.10p / 1p) x 100 x 3.2%] / 365 = £544.32 / 365
= [(170.10p / 1p) x 100 x 3.2%] / 365 = £1.49

i.e. £544.32 is the same as the annual cost of borrowing £17,010 at 3.2%.

Therefore, for every day you are long of the stock, your spread betting account would be charged £1.49 for that night's funding.

So if you held the trade for 30 days, and assuming the shares have an average closing price of 170.1p, you would be charged 30 x £1.49 = £44.70.

Overnight Financing Example - Shorting a UK Equity

At the moment, Interbank rates are very low and so for short positions we are charging the Applicable Interest Rate at 2.5% - RIR.

So if you sold BP shares for £20 per penny, the Applicable Interest Rate would be 2.5% - LIBOR = 2.5% - 0.7% = 1.8%.

If you held the trade for one night, and the market closed overnight at 447.90p, then your spread betting account would be charged £0.44 for overnight financing.

Trade Sell
Market BP Rolling Cash
Stake £20/penny
Unit Risk 1p
Applicable Interest Rate (i) 1.8% = 2.5% - LIBOR = 2.5% - 0.7%
Days Trade Kept Open 1
Average Closing Price 447.90p

Overnight Financing = [(Closing Price / Unit Risk) x Stake x i] / 365
= [(447.90p / 1p) x £20 x 1.8%] / 365 = £161.24 / 365
= [(447.90p / 1p) x £20 x 1.8%] / 365 = £0.44

Stock Market Index Overnight Financing Example

Trade Buy
Market UK 100 Rolling Cash
Stake £2 per point
Unit Risk 1 point
Applicable Interest Rate (i) 3.2% = LIBOR + 2.5% = 0.7% + 2.5%
Days Trade Kept Open 1
Average Closing Price 6500


A £2 per point buy of the UK 100 rolling cash market with a closing price of 6,500 would be equal to a market exposure of £13,000.

Overnight Financing = [(Closing Price / Unit Risk) x Stake x i] / 365
= [(6,500 points / 1 point) x £2 x 3.2%] / 365 = £416 / 365
= [(6,500 points / 1 point) x £2 x 3.2%] / 365 = £1.14

i.e. £416 is the same as the annual cost of borrowing £13,000 at 3.2%.

So if you held the trade open for one night, your spread betting account would be charged £1.14 for that night's funding.

Forex Overnight Financing Example

Let's say you buy the GBP/USD rolling spot market for £2 per $0.0001 move.

With forex markets, the Relevant Interbank Rate is the funding rate of the second currency minus the funding rate of the first currency.

So for GBP/USD, the RIR = US Federal Funds Rate - LIBOR = (0.1% - 0.7%) = -0.6%

Because you are buying the market, the Applicable Interest Rate = RIR + 2.5% = -0.6% + 2.5% = 1.9%.

If you held the trade for one night, and the market closed overnight at $1.54512, then your spread betting account would be charged £1.61 for overnight financing.

Trade Buy
Market GBP/USD Rolling Spot
Stake £2 per $0.0001
Unit Risk $0.0001
Applicable Interest Rate (i) 1.9% = RIR + 2.5% = -0.6% + 2.5%
Days Trade Kept Open 1
Average Closing Price $1.54512

Overnight Financing = [(Closing Price / Unit Risk) x Stake x i] / 365
= [($1.54512 / $0.0001) x £2 x 1.9%] / 365 = £587.15 / 365
= [($1.54512 / $0.0001) x £2 x 1.9%] / 365 = £1.61

Rolling Markets and Dividend Adjustments

On the morning that a share goes ex-dividend, the share price will typically fall by the amount of the dividend.

Therefore we make a 'Dividend Adjustment' for any rolling equity spread bets you hold at the close of business on the day before the share goes ex-dividend.

If you are long of the market, your account will be credited with 90% of the dividend.

If you are short of the market, your account will be debited by 100% of the dividend.

Dividend adjustments apply to both individual shares and to stock indices like the UK 100.

Any credits to/debits from your account take place on the ex-dividend date.



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