The standard settlement of a FOREX trade is two business days for delivery of currency. If a client trader desires not to take immediate delivery but rather to maintain his market exposure, a rollover is required. In this case, counter transactions encompassing the same currency pair, for the same amounts, settled on a spot basis, are needed where one transaction closes the position for the "old" value date, and simultaneously opens the position for the new value date.
Because the dealer has extended margin credit to trade, the dealer may charge or pay interest to the client trader for these position rollovers. Whether a fee will be charged or a payment made depends upon the short-term interest rates in the countries of the currencies in the pair. For example, you sold 100,000 EUR/USD.
It means that you effectively borrowed 100,000 Euro from the dealer, in this case FOREX First, against the current interest rate on Euro, you sold Euros and earned a corresponding amount in US dollars, which FOREX First is now "holding" for you. FOREX First pays you for the US dollars you placed with it at the current interest rate on US dollars. You pay the interest rate that currently can be earned on EUR investments.
If USD investments pay more than EUR investments, you will receive payment. If EUR interest rates are higher you will be charged interest. Positions are usually carried-over to the next business day from 23:00 till 01:00 GMT.
The value date of transactions entered into on Thursday will be the next Monday. When rolling the value date of the position from Wednesday to Thursday, rollover pips will be multiplied by 3, as the weekend will be considered in the computation. In the case of holidays in the country of the given currency, rollover pips will be also multiplied by a corresponding number of days.
