FAQ——Inventory fee

 What is the inventory fee?

The inventory fee is the interest paid or earned for holding the position overnight. Each currency has its own interest rate. Since foreign exchange is traded one by one, each transaction involves not only two currencies but also two different interest rates. The interest rate of the currency bought is higher than the interest rate of the currency sold, and you can earn overnight interest (positive overnight interest). If the interest rate of the purchased currency is lower than the interest rate of the sold currency, you will need to pay overnight interest (negative overnight interest). Overnight interest may significantly increase your transaction costs or profits.

 Examples of inventory fees

When you buy euros/dollars, you are actually buying (depositing) euros and selling (loaning) dollars to pay for the transaction. If the interest rate of the euro is 4.00% and the interest rate of the dollar is 2.25%, you are buying a currency with a higher interest rate, so you will earn overnight interest-an annual interest rate of about 1.75%. If you sell EUR/USD, you are selling a currency with a higher interest rate, so you need to pay overnight interest-an annual interest rate of about 1.75%, because you are paying interest in Euros and earning interest in USD.

One of the most popular foreign exchange strategies in the 21st century is "arbitrage trading". "Arbitrage trading" also uses the interest rate gap of different countries and the low margin trading available in the foreign exchange market. *

 When is the inventory fee charged?

SFEX trading starts and ends at 0:00 GMT every day. Any positions opened before 0 will be considered as holding positions overnight and need to calculate overnight interest. Positions established after 0 o'clock will not be calculated for overnight interest until the next day.

At 0 o'clock, the positive or negative overnight interest of each open position will be displayed on your account within one hour and will be directly reflected in your account balance.

Weekends and holidays

Most liquidity providers around the world (including global banks, financial institutions, and major brokers) are closed on Saturdays and Sundays, so these two days do not calculate the overnight interest on foreign exchange positions, but most liquidity providers still Calculate the interest for these two days. For this reason, the foreign exchange market will calculate the three-day interest on positions that stay overnight on Wednesday, so if you hold a position overnight on Wednesday, the interest is generally three times that of an overnight position held on Tuesday. There is no overnight interest on holidays, but two nights before the holiday are calculated for an extra day of overnight interest. Generally speaking, when the currency involved in the transaction meets an important holiday in the country where it belongs, the holiday overnight interest will be calculated. For example, on July 4th, American Independence Day, the US liquidity provider suspends operations, and all positions of the US dollar currency pair are located at 5 pm on July 1st to calculate the extra day's overnight interest.

 Where are the charging standards for inventory fees shown?

SFEX closely tracks changes in interest rates in various countries and clearly shows the standard of inventory fees. Please note that SFEX interest rates are provided by multiple liquidity providers. SFEX will do its best to display interest for customers to check before the interest is credited to your account. However, in times of extreme market volatility, interest rates may change on the same day.

The following table shows examples of overnight interest on positions on the trading platform. To view the daily overnight interest rate, please check by opening a demo account

To view the inventory fee standard, please go to the quotation window, click the right mouse button and select "Specifications". In the contract details, you can view "Buy Order Swap Inventory Fee" and "Sell Order Swap Inventory Fee". The displayed number is a negative number indicating the inventory fee you need to pay (in points), and a positive number indicates the inventory fee you earn (in points).

 Will inventory fees and related policies vary from broker to broker?

Yes. SFEX pursues a transparent overnight interest policy. Different brokers (platforms/exchanges) will adopt different charging standards because of the different sources of liquidity quotes.