Overnight funding

If you place a short-term bet and want to keep it open overnight, your provider may charge a daily interest fee.

When you use leverage, you’re effectively borrowing funds from your provider, which may incur a charge overnight

Why is overnight funding charged?

When making a spread bet, you’re using leverage. This means your provider is effectively lending you the money required to open your position, outside the initial deposit you’ve paid. 

Let’s say you’re using a daily bet. As we explain on the expiries page, this type of bet is designed primarily for short-term positions. So, if you want to keep it open overnight, most providers will charge a small fee to cover the cost of the money you’ve effectively borrowed

The charge will be triggered once you pass the provider’s daily cut-off time (typically 10pm UK time, although this may vary for international markets). If you close your position on the same day before this time, there is no funding fee.

How are the charges calculated?

Overnight funding charges will invariably differ between providers. However, as an example let’s look at how we do it at IG.

Shares, indices and other markets

For the majority of markets, other than forex and spot metals, our funding fee is the relevant interbank rate for the currency in which your bet is made, plus or minus an admin fee depending on whether your position is long or short. The interbank rate is the interest rate charged between banks for short-term loans. It is a key indicator for other interest rate charges.

Let’s say you have a long bet on a UK share, made in GBP. Our funding charge would be based on the Libor (London Interbank Offered Rate) one-month overnight rate, which is the interest rate that major banks charge to lend funds to each other. We would calculate it like this:

Charges on shares and indices | Overnight funding | learn.spreadbetting

For a short position on the same market, the calculation would be the same except that we would deduct our 2.5% admin fee from Libor.

Forex and spot metals

For forex and spot metals deals, IG charges the tom-next rate plus a small admin fee (no more than 0.0022% per day).

Tom-next, an industry-standard rate, is short for 'tomorrow-next day', and is the means by which forex speculators are able to keep forex positions open overnight without taking physical delivery of a currency. They manage this by swapping any overnight positions for an equivalent contract that starts the next day. The price difference between the two contracts is called the tom-next adjustment.

To give an example, let’s say you’re betting on a forex pair for which the tom-next rate is -1.39/-0.39. In this case we’d use:

  • -0.39 to calculate the funding cost on a long position
  • -1.39 to calculate the funding cost on a short position

And our calculation would look like this:

Charges on Forex and spot metals | Overnight funding | learn.spreadbetting

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