Are CFD financing rates low at nextmarkets as of February 2024?
Not quite. CFD financing rates are overall average at nextmarkets, based on the rates for four different CFD products.
- The financing rate (also called an overnight rate) holds particular significance in CFD trading, especially if you intend to maintain your position overnight.
- It is a time-sensitive cost that adds up as you extend the duration of your position.
- Brokers typically apply varying financing rates depending on the underlying assets involved.
- To determine if a broker's CFD financing rates are low, we assess the average rates for four different assets (see table below) and compare them to rates offered by other CFD brokers.
- Please note that additional fees, such as non-trading fees, contribute to your overall trading cost as well.
So if you are happy with a broker offering CFDs with okayish financing rates then nextmarkets is a great choice. Keep in mind that average overall does not necessarily mean that all the rates are average: they could be low for two products, and high for the other two, thus adding up to average. Check the table below to see the exact financing rates for the product you are interested in.
If you are an experienced CFD trader and are aware of the risks, just go to nextmarkets and start trading. If you are not sure what financing rates are, read on; we will break it down for you and show an example.
52.55% of retail CFD accounts lose money
If you want to find a broker that charges lower CFD financing rates, check what better options are out there: find CFD brokers with lower fees by using our Find My Broker tool!
We have also put together a list of the best CFD brokers out there: check out our top recommendations on the best CFD brokers for 2024 for your country!
What are the CFD financing rates at nextmarkets?
Having reviewed more than 100 brokers, BrokerChooser's analysts evaluated the CFD financing rates by examining four popular CFD products and taking an average rate for these brokers. In comparison to the average rates determined by our analysts, nextmarkets's CFD financing rates are generally classified as average.
Below is a table of the financing rates offered by nextmarkets for the four CFD products (2 stock, 2 stock index) that were assessed. We have also included a comparison to the financing rates offered by nextmarkets's closest competitors:
CFD financing rate class
Apple CFD financing rate
Vodafone CFD financing rate
S&P 500 CFD financing rate
Euro Stoxx 50 CFD financing rate
Data updated on February 12, 2024
What is the financing rate for CFDs?
You may have come across various terms such as swap fee or overnight rate, but they essentially refer to the same thing. These terms represent a key cost associated with CFD trading. To summarize, CFDs are financial instruments that allow you to leverage your investments and gain exposure to a diverse range of assets without actual ownership.
When engaging in CFD trading, you have the option to initiate positions using borrowed funds from the broker, also known as leverage. If you maintain your position open beyond a single day, the broker will impose a charge. This charge corresponds to the interest paid on the borrowed funds (or in certain instances, the interest received). This fee levied by the broker is commonly referred to as the financing rate.
- Financing rates can vary based on your position (long or short) in the CFD. Holding a long position overnight entails borrowing funds from the broker to purchase the underlying asset. In such cases, you are subject to paying the financing rate, which is typically the benchmark interest rate of the asset's currency, plus the fee charged by the broker.
- Conversely, holding a short position overnight involves selling the underlying asset without actual ownership, and without receiving the amount for the sale in cash. That is why, in the case of a short position, you are receiving the financing rate. The received amount is determined by the benchmark interest rate of the asset's currency and the broker's fee. The broker deducts its fee from the financing rate you receive. Hence, if the benchmark interest rate is lower than the broker's overnight fee, you may encounter a negative financing rate, resulting in you paying interest on the sold asset.
Financing rates generally closely correlate with benchmark interest rates in general. Consequently, in an environment characterized by high interest rates, financing rates tend to rise as well. This means you may incur higher overall expenses through financing rates than in a low-interest economic environment.
Unlike one-time fees such as spreads and commissions, this particular trading cost accumulates over time. As the duration of your position increases, so does the amount of your financing expenses. Therefore, you should consider this aspect when formulating your trading strategy.
How are CFD financing rates calculated?
Financing rates can vary depending on your chosen broker, the specific asset being traded through CFDs, and the currency in which the trades are conducted. Let's look at an example of how a financing rate could be calculated when trading CFDs on Company Y stock!
Let's say that you want to trade CFDs on the stock of Company X, which is listed on the New York Stock Exchange (NYSE). You decide to short (sell) 1,000 shares of Company X at a price of $50 per share, with a total position size of $50,000.
Suppose you are trading a stock CFD for Company Y, which is listed on a major stock exchange. You decide to take a long position and buy 500 shares of Company Y at a price of $80 per share, resulting in a total position size of $40,000.
Your broker charges an annual financing rate of 3% for this stock CFD, and the benchmark interest rate for the currency associated with the stock is 4% per year. To calculate the financing rate for your long position, follow these steps:
- Determine the total value of your position: 500 shares x $80 per share = $40,000.
- Calculate the daily financing charge (the currency benchmark rate plus the broker's fee): $40,000 x (3% + 4%) / 365 = $7.67.
- Multiply the daily financing charge by the number of days you hold the position overnight. For instance, if you hold the position for 7 days, the calculation would be $7.67 x 7 = $53.69.
In this example, the financing rate for your long stock CFD position would be approximately $7.67 per day. Remember that financing rates can vary by broker and may be influenced by factors such as the specific stock being traded and prevailing interest rates.
What are the other CFD fees?
- The primary expense involved in CFD trading is the spread, which represents the difference between the bid price and the ask price of the CFD. It serves as the transaction cost paid to the broker. The spread established by brokers can fluctuate based on factors such as the underlying asset's volatility and prevailing market conditions.
- Additionally, some brokers may charge a commission on CFD trades as well, typically calculated as a percentage of the trade's value. Alternatively, certain brokers may opt for a wider spread and not charge any commission.
- Don't forget to consider non-trading fees as well. These fees are not directly associated with individual trades and can vary based on the type of account held and the chosen broker. Non-trading fees might encompass charges such as withdrawal/deposit fees, conversion fees, and inactivity fees.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 52.55% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. .
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