Hi Casey, I'm not referring to the ESMA-related margin increases. This is actually funding costs I'm talking about.
Changes to overnight funding rates
From 4 February, we’re changing the way we calculate overnight funding on shares and indices. Whereas the interest rate used to be based on the currency of the trade, it will now be based on the currency of the underlying instrument.
This could affect you positively or negatively – see below for reference. Example: Wall Street
If you trade on Wall Street in GBP, you’d previously pay overnight funding based on the GBP interest rate. From 4 February, you’ll pay funding based on the USD rate instead.
So if you bought £2 per point at 24,000, giving you a notional value of £48,000, this is how your funding charges would change:
Interbank rate1
IG rate2
Daily cost
GBP
0.73%
3.23%
£4.31
USD
2.52%
5.02%
£6.69
Difference:
£-2.38
If you sold £2 per point at 24,000, giving you a notional value of £48,000, this is how your funding charges would change:
Interbank rate1
IG rate2
Daily cost
GBP
0.73%
1.77%
£2.36
USD
2.52%
-0.02%
-£0.03
Difference:
£2.39
1 ‘Rate’ refers to the 1-month interbank funding rate (eg LIBOR for the UK). Rates correct as of 14 January 2019. 2 ‘IG rate’ refers our total funding charge, which is 2.5% on top of the interbank rate. We debit your account for a long position, and credit your account for a short position (if the interbank funding rate is greater than 2.5%, or greater than 3% on mini/micro CFD contracts). Find out more here.