When trading forex and certain other financial instruments, you may notice that overnight interest charges (swaps) are three times higher on Wednesday than on other trading days. This isn't an error or a penalty—it's a standard industry practice that reflects how settlement dates work in the international financial markets.
Understanding the Triple Swap on Wednesday
The triple swap on Wednesday occurs due to the T+2 settlement convention in forex markets. Here's why this happens:
Settlement Period: In international banking, foreign exchange transactions typically settle two business days after the trade date (T+2).
Weekend Accounting: Since markets are closed on Saturday and Sunday, positions held over the weekend need to account for these non-trading days.
Forward Date Calculation: When you hold a position overnight on Wednesday, the settlement would normally occur on Friday. However, to account for Saturday and Sunday, the interest for these three days (Friday, Saturday, and Sunday) is charged or credited on Wednesday night.
Example of Triple Swap Calculation
Let's say you're trading EUR/USD:
Monday overnight position: 1-day swap charge
Tuesday overnight position: 1-day swap charge
Wednesday overnight position: 3-day swap charge (accounting for Friday, Saturday, and Sunday)
Thursday overnight position: 1-day swap charge
Friday overnight position: 1-day swap charge
Important Considerations
Impact on Trading Strategy: If you're sensitive to swap costs, you might want to consider closing positions before the Wednesday rollover if the swap rate is negative for your position.
Positive Swaps: If you're in a position where you receive swap interest (positive swap), Wednesday can be advantageous as you'll receive triple the amount.
Different Instruments: While most forex pairs apply triple swaps on Wednesday, some other instruments may have their triple swap day on Friday to account for the weekend.
Holiday Adjustments
During weeks with banking holidays, the triple swap day might shift. For example, if Wednesday is a banking holiday, the triple swap might be applied on Tuesday instead. Always check the economic calendar for potential holiday impacts on swap calculations.
For specific information about swap rates for individual instruments and how they apply to your trading account, please contact our Live Chat support team through your Client Portal.