Why are swap rates among brokers so vastly different?

johnnybegoode

Trader
Jul 19, 2016
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I was looking at this
http://www.myfxbook.com/forex-broker-swaps

Why are swap rates among brokers so vastly different?
I.e.
For Long EURUSD:
High is like -3.70 pips (InstaForex)
Low is like -0.06 pips (Oanda)
There are also some brokers that pay you interest instead.

Does that make one broker more expensive than the other when you have to hold overnight?
It is also multiplied by the number of days.

Swap rate is also being applied base on sever time.
I.e. if you long EURUSD at 2359hr, you would be charged a minute later.

Some brokers even have -ve swap rate on both long and short position of the same pair.
What are the justification?

Can they change the swap rate anytime to screw the client.

How did they came out with their swap rate anyway?
 

Enivid

Administrator
Staff member
Nov 30, 2008
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www.earnforex.com
Why are swap rates among brokers so vastly different?
I.e.
For Long EURUSD:
High is like -3.70 pips (InstaForex)
Low is like -0.06 pips (Oanda)

One reason could be incorrect reporting by myfxbook. I recommend double-checking with our Position Size Calculator - you get the precise swap values on the Swaps tab.

Another reason could be in the different pip definition between those two brokers. For example, InstaForex could be using fractional pips (0.00001), while Oanda - standard pips (0.0001).

When the values are in currency units rather than pips, the difference might come from different contract sizes used by brokers - some use standard lots (100,000), some use mini-lots (10,000) by default, others could even be using nontraditional sizes.

Does that make one broker more expensive than the other when you have to hold overnight?

Yes, of course. It could also be a great source of income if the swaps are positive.

Swap rate is also being applied base on sever time.
I.e. if you long EURUSD at 2359hr, you would be charged a minute later.

That is not always so. Some brokers charge/pay swaps at NY close (17:00 EST) for example. This also depends on the trading instrument (currency pair).

Some brokers even have -ve swap rate on both long and short position of the same pair.
What are the justification?

That's called a swap spread. The actual interbank interest rates fluctuate, so brokers reduce the positive rate they pay to traders and increase the negative rate they charge for not to lose on them occasionally. Some brokers probably earn quite a lot on swaps.

Can they change the swap rate anytime to screw the client.

Yes. However that rarely happens.

How did they came out with their swap rate anyway?

Swaps are based on the interbank rates (see LIBOR for example), which in turn depend on the central banks' interest rates.
 

johnnybegoode

Trader
Jul 19, 2016
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"Swaps are based on the interbank rates (see LIBOR for example), which in turn depend on the central banks' interest rates."

I am running 2 identical demo brokers
FXChoice and Trader's Way

FX Choice
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Trader's Way
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The swaps are vastly different.
Trader's way cost way more.
That makes me doubtful that they are based on the interbank rates.
 

Enivid

Administrator
Staff member
Nov 30, 2008
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www.earnforex.com
Why? They surely use different liquidity providers and are charged/paid different rates too. They also probably have different policies regarding swap spreads, with Trader's Way choosing to reduce its risks by charging more on the negative difference.