Spreadbetting fx rollover costs

[Rugby Trader]

can anyone help me here please.

I opened an account with Finspreads so I could trade the three ducks strategy while they allow me 10p per point betting for 8 weeks so I could see if it works for me at relatively low cost.
I expected rollover costs, which last night were fine I had a 19p taken off me for USD/CHF and I was given 2 lots of 15p for 2 AUD/USD positions.

but what they also did is close my position and re-open it, taking the spread for themselves which was very wide overnight (7 for AUS/USD which is normally 3 and 37!!! for USD/CHF which is normally 4 points)

Is it normal for the SB companies to do this?

any help would be appreciated.

 

[ns1000]

Doesn't sound right to me. The only reason to close and re-open should be to replicate the interest adjustment but it sounds like they've charged you for it already. If the closing and reopening was an interest cost, then the time of day it's done should not affect the spread as it should be a mathmatical exercise. You should not have to pay the bid / offer spread. Give them a call and ask them to explain what teh adjustments are for, and post back if they don't satisfy you.

 

[Dommo]

If you hold a rolling SB position overnight, normally the firm (at least the firms I've used) will notionally close and reopen the position. The PL at that point will get rolled into your cash position and you restart with 0 PL. This is basically an accounting device and should not affect net PL. The close and reopen prices should be identical (subject to adjustments for dividends on indices, and any moves in the underlying if the underlying market closes while the rollover process takes place). Funding/interest adjustments will also be made on your account. I doubt that the firm has retransacted on your behalf and pocketed another spread. You can do your own check on change in total equity from trade inception to trade close, taking into account the rollover costs you know about. The firm should be able to give you a line by line account statement for every transaction (of any kind - I don't just mean the trades you place) on the account. If it doesn't all add up I would call them up and ask for clarification.

 

[Rugby Trader]

thanks for the reply ns1000, i've just spoken with finspreads and they explained to me what was going on.
basically i got the wrong end of the stick. I haven't held rolling contracts overnight before and didn't fully understand how they worked. i do now.
glad i decided to test myself out on a 10p per pip platform.

 

[Rugby Trader]

Dommo,

That's exactly what happened but I hadn't realised it!
Thanks for your help.

RT

 

[Smart Live Markets]

can anyone help me here please.

I opened an account with Finspreads so I could trade the three ducks strategy while they allow me 10p per point betting for 8 weeks so I could see if it works for me at relatively low cost.
I expected rollover costs, which last night were fine I had a 19p taken off me for USD/CHF and I was given 2 lots of 15p for 2 AUD/USD positions.

but what they also did is close my position and re-open it, taking the spread for themselves which was very wide overnight (7 for AUS/USD which is normally 3 and 37!!! for USD/CHF which is normally 4 points)

Is it normal for the SB companies to do this?

any help would be appreciated.

Hi,
I take it you were short USDCHF then to be charged anything ?
But why were you charged 1.9 pips (assuming you were short 10p a pip)?
The TN (tom/next) USDCHF roll last night which is for 3 days to cover the weekend was no where near that. With us you would have been charged nearer 3 pence.

It is disgusting what some of these companies charge in their stealth financing, as they hope and assume clients do not understand it and will not query it.

We had a client recently who was running an £80 pound a point position of GBPUSD with one of the very BIG known companies. They charged him a pip a day to roll it (£80). He opened an account with us and transferred his position over. We charge him the market rate, 16 pence a day.

Under FSA guidelines and MiFID I think some of these companies should be held accountable for their financing charges.

If you would like to open an account with us or even just a demo account, then you can compare what you should be paying or receiving.

We have a minimum of 10 pence per pip on everything and no minimim account opening requirements.

Regards
SLM
smartlivemarkets.co.uk

 

[Rugby Trader]

Hi SLM,

I already have an account with you. I'm not using it currently as I'm taking advantage of Finspreads free £100 offer. As soon as I've taken that off of them, i'll be back to your platform.

Thanks for the heads up though.

RT

 

[Dommo]

It is disgusting what some of these companies charge in their stealth financing, as they hope and assume clients do not understand it and will not query it.

We had a client recently who was running an £80 pound a point position of GBPUSD with one of the very BIG known companies. They charged him a pip a day to roll it (£80). He opened an account with us and transferred his position over. We charge him the market rate, 16 pence a day.

Hi - I'd appreciate it if you would clarify how an £80/pip (assuming that is what you mean), position attracts daily financing of only 16 pence per day.

Your website states "we charge a financing charge of 2% above the overnight borrowing rate", which sounds in line with other firms.

Similarly to other firms, on short positions:

"If you had gone short on CFD's (ie you have a position on which you will profit if the market concerned goes down) then you have effectively deposited the entire value of the trade with us and will receive financing which is the overnight lending rate minus 2% (subject to a minimum of 0%)."

My rough calcs show that £80/pip equates to approx GBP 1.234M notional. I don't know what the exact overnight funding rates are but I'm sure they are low, and to be conservative, I assume overnight borrowing rate of 0%.

Then I would expect to pay overnight financing on the GBP position of
(1235000 * 0.02) / 365 = £67 approx.

I don't imagine I'd get credit on the USD short position in view of low rates and the 0% floor.

I'm orders of magnitude away from your figure of 16 pence - could you possibly clarify for me?

 

[Dommo]

SLM - my calc above is a standard SB type calc. I just saw that you do a different Tom/Next calc for FX - could you explain the difference? A illustration of the Tom/Next calc would be very informative.

 

[Smart Live Markets]

Hi - I'd appreciate it if you would clarify how an £80/pip (assuming that is what you mean), position attracts daily financing of only 16 pence per day.

Your website states "we charge a financing charge of 2% above the overnight borrowing rate", which sounds in line with other firms.

Similarly to other firms, on short positions:

"If you had gone short on CFD's (ie you have a position on which you will profit if the market concerned goes down) then you have effectively deposited the entire value of the trade with us and will receive financing which is the overnight lending rate minus 2% (subject to a minimum of 0%)."

My rough calcs show that £80/pip equates to approx GBP 1.234M notional. I don't know what the exact overnight funding rates are but I'm sure they are low, and to be conservative, I assume overnight borrowing rate of 0%.

Then I would expect to pay overnight financing on the GBP position of
(1235000 * 0.02) / 365 = £67 approx.

I don't imagine I'd get credit on the USD short position in view of low rates and the 0% floor.

I'm orders of magnitude away from your figure of 16 pence - could you possibly clarify for me?

Hi
You are getting muddled between FX and CFDs.
The 2% above or below LIBOR only refers to cash Indices and Equities.
All our FX markets have financing based on the market rates, so there no 2% involved. I know some companies use the 2 or 3 percent method for their FX as well, which in my belief is funadmentally wrong !

The example I gave about the £80 was a couple of months ago when the daily roll for GBPUSD was near enough flat (as tomorrow to the next day rates between the US and the UK were practically the same).

If you had a position of that size on with us today the roll tonight would be £7.2 if you were long. Still somewhat better than £80 1 pip charge I think you will agree.

I hope that clears that up.

Regards

SLM

 

[Dommo]

Thanks, and yes - you are right - I did the SB type calc (I am used to trading indices). The difference is huge.