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Financing Contract For Differences

Financing is charged or credited on positions that are carried or held overnight.

On short positions you will generally be credited, whereas on long positions you will be debited. The Financing Adjustment for Shares and Index positions are based on a calculation of the daily applicable rate of interest for the notional value of your position. For CFDs the rate will vary depending on the notional value of the position and is calculated as follows:

• UK Stocks / Index: Total Contract Value x LIBOR +/- 3%/365
• US Stocks / Index: Total Contract Value x FFER (Federal Funds Effective Rate) +/- 3%/360
• EU Stocks / Index: Total Contract Value x EONIA (European Overnight Index Average) +/- 3%/360

We base our interest rates on an applicable rate, depending on the trade’s currency.

• LIBOR, London Interbank Offer Rate – GBP
• FFER, Federal Funds Effective Rate – USD
• EONIA, European Overnight Index Average – EUR
• TOIS, Swiss Tom/Next Indexed Swap – CHF
• RBA36, Reserve Bank of Australia Rate – AUD
• NZOCR, New Zealand Official Rate – NZD
• TONAR, Tokyo Overnight Average Rate – JPY
• HIBOR, Hong Kong Interbank Offered Rate – HKD
• SIBOR, Singapore Interbank Offered Rate – SGD

The interest charge or credit will be shown in your statement under the heading ‘CFD Position Summary’ and is shown in the ‘Interest’ row.

Example
Take an example of the 2000 long position of VOD. The ‘Mark to market’ price (closing price) was 140.25. The notional total value of the position is 2000 X £1.4025 = £2,805 (2000 X 1.4025 = 2805). If you were to borrow £2805 from a bank for one night, you would be charged one nights’ interest, which is effectively what we will do.  Therefore if we assume that LIBOR (London Interbank Offer Rate) is 4.25%, then the interest payable overnight will be £0.56p, (2,805 * 7.25% / 365 days).

Conversely, if you placed a short trade on Vodafone you would receive the benefit of the financing, i.e. you would receive daily interest. This is because technically you are lending the funds, and you are therefore owed interest. This interest is credited to your account whenever the position is held overnight.

Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily a guide to future performance. Trading in these markets is generally considered to be suitable only for the more experienced investor as it carries a high degree of risk. An investor may not receive back the amount of their original investment and in certain circumstances may be liable for a sum that is greater than their original investment. If in any doubt, please seek independent financial advice.