Archive for the ‘forex rollovers’ Category
Although most of the markets are dominated by the power U.S, the spot forex trading is still done at London. Now a day’s most of the forex dealing is done as Spot deals. All the spot deals are for due for settlement after the lapse of two working days. This time period is called as delivery date or value date. On that particular date the opposite parties will take currency delivery which they have bought or sold.\
In spot forex, The London time for the closing business hour is 21:59. At that time whatever positions that are opened are automatically rolled over the next working or business day. The next business day as usual will close on 21:59.
This is very much essential to evade the currency’s actual delivery. Since the spot forex is mostly a tentative market, usually the traders won’t like take currency delivery .They normally inform the brokers to rollover the positions. Now a day’s most of the agents automatically do this and that will be in their dealings and policies.
The rolling act of the currency pair is called as Tom next. The tom next sets for today and tomorrow. If you have instructed your broker for rollover position for the next day, the interest differences between the two currencies will be charged by the broker. This happens only if your position is rolled over. On the other hand you will not be charged, if the position n is opened and closed on the same business day.
The broker interest is calculated when he usually closes the position at the business day’s closing time and simultaneously reopen again a new position For instance , a 1 lot ($100,000) USD/EUR is opened .ON Monday at 11.00 at an 0.9950 exchange rate. The rates will fluctuate during the course of the day and at 22.00, the rate is 0.9975. The agent will close the position and reopened a new position at a new value at 0.9976 with a 1 pip difference. This difference is replicated in the in interest rate difference between the Euro and the US dollar.