Reply To: What are overnight fees?

#197109
Christian Harris
Participant

    Swap fees are not solely based on the interest rate differential between the two currencies in a forex pair.

    While the core of the swap fee reflects the difference between the interest rates set by the respective central banks, brokers often add their markup to this rate.

    This markup is part of how brokers generate revenue, especially for accounts with low or zero commissions.

    The exact markup can vary depending on the broker’s policies and whether you hold a long or short position.

    Swap-free accounts (often marketed as Islamic accounts due to Sharia law prohibiting interest) allow you to bypass traditional swap fees.

    However, there’s usually a catch:

    Administrative fees: Instead of swaps, brokers may charge a flat administrative fee or widen the spreads to compensate for the loss of swap revenue. This fee structure varies widely between brokers.

    Restrictions: Some brokers limit the range of instruments available on swap-free accounts or impose time limits on how long positions can be held without incurring fees.

    Account eligibility: Not all brokers offer swap-free accounts to non-Muslim traders, and some may require documentation for religious compliance, though others provide it to all clients.