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Exchange Traded CFD Interest
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Standard over the counter contract for difference financing costs
are payable for holders of long positions and paid to holders of
short positions. The same mechanics apply to exchange traded cfds.
The contract interest is fixed to a benchmark overnight cash rate
in the native currency of the underlying physical product and varied
whenever the benchmark cash rate is varied. In the case of Australian
denominated Cfds, the benchmark cash rate is the daily overnight
target rate published by the Reserve Bank of Australia. US based
contract denominations are subject to the published Federal Funds
Rate posted daily by the Federal Reserve Bank of New York.
The interest calculations extend to non market days so holders
of positions over the weekend are subject to financing charges calculated
over Friday, Saturday and Sunday.
Traders and investors will need to be aware of the differences in
finance charge calculations on the basis of the underlying currency
the contract is denominated in.
Exchange Traded CFD Open Interest Rates
The daily open interest charge is the charge imposed by the ASX
for holding an open position in the market. In traditional over
the counter cfd markets this cost is the differential imposed on
top of the overnight cash rate commonly referred to as the financing
rate.
The OIC rate is set by the exchange and payable daily on open positions
and can be changed by the asx in response to market circumstances.
It is, however, according to the ASX, intended to be changed infrequently.
Holders of open positions pay this charge the next trading day.
Open long positions are subject to the financing rate plus the open
interest charge. ie benchmark cash rate + OI charge. Short position
holders are subject to the financing rate and receive payment of
the open interest charge. ie benchmark cash rate - OI charge.
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