FX pricing

The FX Spot market is used for immediate currency trades. The term “Spot” refers to the standard settlement convention of two business days after the trade date (known as T+2)¹ . For example, a EURUSD trade executed on a Monday will settle on a Wednesday (if there is not a public holiday in either currency on Tuesday or Wednesday, in which case the trade will be settled on the next available business day). The settlement period refers to the amount of time that is allotted to both parties to satisfy the trade’s obligations. At Saxo, FX Spot trades do not settle. Instead, open positions held at the end of a trading day (17.00 Eastern Standard Time) are rolled forward to the next available business day².

The rollover is made up of two components; the Tom/Next swap points (Forward Price) and the financing of unrealised profit/loss (Financing Interest).

1. Tom/Next swap points (Forward Price)
Bid/ask interest rates for each currency are derived from swap points quoted by Tier-1 banks. Client specific mark-ups are added to the derived interest rates, which are then used to calculate swap points for each currency pair. These swap points are used to adjust the opening price of positions⁴ being rolled next business day².

2. Financing of unrealised profit/loss (Financing Interest)
Any unrealised profit/loss on positions that are rolled from one day to the next are subject to an interest credit or debit. The unrealised profit/loss is calculated as the difference between the opening price of a position (possibly corrected for previous Tom/Next rollovers) and the Spot price at the time that the rollover is performed.

The rate is calculated based on the daily market overnight interest rates plus/minus a mark-up corresponding to +/- 2.00%. The final rate is used to adjust the opening price of the position⁴.

¹ The standard settlement convention of T+2 is applicable for the majority of currency pairs; however there are exceptions to this rule e.g. USDCAD, which has a settlement convention of one day after the trade date (T+1).

² The global market convention is that the value date rolls forward at 17.00 Eastern Standard Time, however there are exceptions to this rule e.g. NZD, which rolls forward at 07.00 New Zealand Daylight Time.

³ An additional +/- 0.30% mark-up is applied to Mexican Peso (MXN), Russian Ruble (RUB), Turkish Lira (TRY) and South African Rand (ZAR) currency crosses.

⁴ Applicable to the default rollover methodology.