Rolling FX

Each rolling FX market has two currency codes assigned to it: base and secondary.  Each of these is used to obtain the most recently entered overnight LIBOR rates.

If the client is long and the client or market uses percentage charges, the posting is calculated as base rate minus secondary rate minus the financing percentage rate, then multiplied by the settlement price divided by the trading unit ratio, all divided by 365 and 100, then multiplied by the quantity.

If the client is short and uses percentage charges then the formula is the same except the LIBORs are swapped so it is secondary minus base.

If the client uses fixed charges, then the formula is simply quantity multiplied by fixed charge, either the long or short value.

Below are some detailed examples on how we work out financing:

If a long position is held (Buy)

(((LIBOR1 - LIBOR2) - Rate Adjustment)/100) x (Settlement Price/Price Increment) x Stake/365

If a short position is held (Sell)

(((Rate2 - Rate1) - Rate Adjustment)/100) x (Settlement Price/Price Increment) x Stake/365

Example 1
FOR EURGBP spot position Long 10:
LIBOR1 (EUR) = 0.4400
LIBOR2 (GBP) = 0.5500
Finance rate = 2%
Settlement price = 0.8910
Price Increment = 0.0001
Finance days = 365
Rollover days = 1

(((0.4400 – 0.5500) – 2)/100) x (0.8910/0.0001) x 10/365
or
((-0.11) – 2) x (8910) / 365 / 100 * 10
= -$5.15

Example 2
FOR EURGBP spot position Short 10:
LIBOR2 (GBP) = 0.5500
LIBOR1 (EUR) = 0.4400
Finance rate = 2%
Settlement price = 0.8910
Price Increment = 0.0001
Finance days = 365
Rollover days = 1

(((0.5500 – 0.4400) – 2)/100) x (0.8910/0.0001) x 10 /365
or
((0.11) – 2) x (8910) / 365 / 100 * 10
= -$4.61

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