What swap reflects
Swap is the financing adjustment for holding a position past the daily rollover time, typically 17:00 New York. Its underlying logic is the interest rate differential between the two currencies in the pair: long the higher-rate currency receives swap; long the lower-rate currency pays it.
On EUR/USD with the ECB deposit facility rate at 2.50% and the US federal funds rate at 5.25%, a long EUR/USD position is long EUR (lower rate) and short USD (higher rate). The annualised differential is −2.75% — the trader pays.
The position is synthetic. No actual lending or borrowing of currencies occurs. The differential is calculated from interbank tom-next forward points, which approximate the cost of rolling the position one day forward in the wholesale market.
Daily swap calculation, with worked numbers
For a long EUR/USD position of 1 standard lot held overnight, with rates as above:
Position notional = 100,000 EUR. Annualised differential = 2.50% − 5.25% = −2.75%. Daily swap before broker markup = 100,000 × −2.75% ÷ 365 = −€7.53 per day. Converted to USD at 1.0850: −€7.53 × 1.0850 = −$8.17 per day before markup.
Brokers add a markup to the underlying interbank rate. Typical markups run 0.5–1.5% annualised, applied to the differential. With markup, the trader-debited rate runs −$10 to −$13 per day — well above the raw interbank cost.
The markup is rarely disclosed transparently. Brokers publish daily swap figures in their contract specifications; the markup must be inferred by comparing the published figure to the implied interbank rate. Comparing brokers requires comparing the same instrument and direction at the same notional size.
Wednesday triple swap and the T+2 settlement convention
Forex operates on a T+2 settlement cycle: trades made today settle in two business days. A position rolled on Wednesday settles on Friday and simultaneously accounts for the weekend.
Wednesday rollover therefore applies three days of swap rather than one. The same long EUR/USD position that pays $10/day on a normal weekday pays approximately $30 on Wednesday.
Most platforms display the triple debit or credit as a single line on Wednesday's daily statement; this is convention, not malfunction. Some brokers move the triple-swap day to Friday for specific instrument classes. The broker's terms specify the convention used for each instrument category.
Swap cost over time, and the carry-trade idea
Holding the long EUR/USD example position one full year at the average debit pays approximately −$3,650 to −$4,745 in swap alone — a 36% to 47% drag on a $10,000 account before any consideration of Spread, commission, or directional movement.
The same logic in reverse describes a carry trade. A short EUR/USD position at the same rates earns positive swap before broker markup; the markup reduces the credit but does not reverse it. Strategies that hold positive-swap positions long-term to capture this credit are called carry trades.
The risk of a carry trade is exchange rate movement. A small positive daily swap does not offset a large adverse pip movement. The historical case is yen-funded carries — short JPY against high-rate currencies — that work for years and unwind violently when JPY appreciates suddenly.
Swap on instruments other than forex
CFD positions on equity indices, commodities, and individual shares carry overnight financing analogous to forex swap, calculated against the broker's reference rate (typically the relevant interbank rate plus a markup) rather than from a currency pair's interest differential.
A long CFD on a major equity index in a positive-rate environment pays daily financing — long the index is being long the asset and short cash, which costs financing. The figure is meaningful for positions held more than a few days. The broker's swap or financing tables publish the daily figure per direction per instrument.