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What are Forex Rollovers?

Mason Friis-Burden
Updated

What is Forex rollover?

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 day (with some exceptions).

In such a case, the opening price gets adjusted.

Intraday FX positions are not subject to rollovers.

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

Rollover Methodology example

Normal Forward (price adjustment to the opening price of a position) 

Amount100,000
OpenRate1.12212923
SpotNow1.05586
Forward Price0.000064
Financing Interest0.00000218
New Rate1.12219541

 

The rollover is applied by:

  • Adjusting the opening price of a position to include the Forward Price and Financing Interest components:
    • OpenRate + Forward Price + Financing Interest = New Rate
    • 1.12212923 + 0.000064 + 0.00000218 = 1.12219541
  • No closing rate and no closing position is generated for a swap executed using this method

Forex Rollovers Report

You can view the rollover history on your FX positions by selecting your client from the client tree. Navigate to Portfolio (1), press on Reports (2) and open the Forex Rollovers report (3). 

 

Year-end ‘turn’ effect in FX swap points

The ‘turn’ effect is a phenomenon that exists in financial markets which are caused by supply and demand for funding over key dates such as year or quarter-end. This can create anomalies in the forward curves for certain currencies, and we are already beginning to see this priced into the year-end swap points that we receive from our liquidity providers.

Swap points are a key component of the FX Value Date Rollover which is used to adjust the opening price of a position[1], and therefore if you hold an FX spot position over year-end you may bear the cost of paying these inflated swap points[2] when compared to normal market conditions.

[1] Applicable to the default rollover methodology
[2] Depending on the currency pair and your positioning (long/short)

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