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Interest Accrual

How and when is interest accrued in CFD trading?

One of the main differences between trading actual shares and trading CFDs on shares is that when trading CFDs, interest is accrued if you are holding an open position at the end of the business day.

When trading on margin, you borrow money from your broker in order to open a position. Interest on the borrowed capital is accrued (added) or deducted (withheld) if you have an open position in CFDs on shares, indices, and/or Exchange Traded Funds, which has to be transferred to the next business day (00:00 h EET).

Note: When trading CFDs on shares or ETFs on a 100% margin (Cash CFDs), interest is NOT charged!

The interest rate determining the daily interest you will pay or receive for an open position is equal to:

  • the prime interest rate for the currency in which the underlying instrument, from which the CFD is derived, is traded;
  • the amount of the premium/financing (with a positive or negative sign) over the prime interest rate. It depends on your position (whether it is short or long).

Note: The interest rate may be a positive or a negative number. Interest rates on CFDs can be found in the Tariff of Interest Rates, Fees and Commissions of Deltastock.
Interests are calculated using the following formula:

Interestdaily = Number of CFDs1 × Closing pricecurrent × Interest rate
100 × 360 (or 365)

1 When calculating the interest, the number of CFDs corresponding to the starting position for the day is used.

If you are holding a long position, the interest will be withheld from your account.

If you are holding a short position, interest will be paid to you if the interest rate on your position is a positive number. The interest will be withheld if the interest rate on your position is a negative number.

The calculated sum is in the currency of the instrument. If your account is in another currency, then the interest amount must be recalculated in the currency of the account – the corresponding closing price for the currency pair.

Examples:

Real interest rates, premiums/financing, and closing prices are used - valid on 17.07.2012.

1) You have an open long position on EUGERMANY30:

a) Your starting position on 17.07.2012 is 5 contracts (CFDs);

b) Closing price: 6613.10 EUR;

c) Prime interest rate in the Eurozone: 0.75%;

d) Premium/financing for a long position in European indices: +3.00%.

Interest = 5 CFDs × 6613.10 EUR × (0.75 + 3.00) = 3.44 EUR
100 × 360

The interest, in the amount of 3.44 EUR, will be withheld from the client’s account.

2) You have an open long position on AUSTRALIA200:

a) Your starting position on 17.07.2012 is 7 contracts (CFDs);

b) Closing price: 4147.81 AUD;

c) Prime interest rate in Australia: 3.50%;

d) Premium/financing for a long position in Australian indices: +3.00%.

Interest = 7 CFDs × 4147.81 AUD × (3.50 + 3.00) = 5.24 AUD
100 × 360

The interest, in the amount of 5.24 AUD, will be withheld from the client’s account.

3) You have an open short position on EUGERMANY30 (The interest rate on the position is a negative number):

a) Your starting position on 17.07.2012 is -5 contracts (CFDs);

b) Closing price: 6613.10 EUR;

c) Prime interest rate in Eurozone: 0.75%;;

d) Premium/financing for a short position in European indices: -3.00%.

Interest = -5 CFDs × 6613.10 EUR × (0.75 - 3.00) = 2.07 EUR
100 × 360

The interest, in the amount of 2.07 EUR, will be withheld from the client’s account.

4) You have an open short position on AUSTRALIA200 (The interest rate on the position is a positive number):

a) Your starting position on 17.07.2012 is -7 contracts (CFDs);

b) Closing price: 4147.81 AUD;

c) Prime interest rate in Australia: 3.50%;

d) Premium/financing for a short position in Australian indices: -3.00%.

Interest = -7 CFDs × 4147.81 AUD × (3.50 - 3.00) = -0.40 AUD
100 × 360

The interest, in the amount of - 0.40 AUD, will be added to the client’s account.


Note: Views expressed here are for education purposes only and are not the views of Deltastock or its employees. These views are not personal recommendations or investment advice. Any quotes of financial instruments displayed on this page are indicative only and do not reflect the current market situation. You may wish to seek independent advice before entering into transactions.