How does overnight funding work on index CFDs?
Verdict
- Overnight funding is a daily charge (or occasionally a credit) on a cash index CFD held past the daily cut-off, calculated on the full value of the position; Pepperstone, our pick in Australia, applies it to cash index CFDs and offers forwards that build the holding cost into the price instead.
- Longs typically pay a benchmark interest rate plus a broker margin; shorts receive the benchmark minus a margin, which can still be a cost when rates are low.
- Pepperstone's index forwards have wider spreads than the cash CFDs (AUS200-F 3 points minimum against 1), so they pay off only for longer holds.
- Check the exact rate shown in the platform's symbol specification before holding a position for more than a few days.
A cash index CFD never expires, so the broker is effectively lending you the full exposure for as long as you keep the trade open. Overnight funding is the interest on that loan. Here is how it is usually calculated, a worked illustration, and the alternatives at Pepperstone.
How Pepperstone handles holding costs on indices
Pepperstone Group Limited (AFSL 414530) gives you two contracts on its main indices. The cash CFD, such as AUS200 or US500, is cheapest to enter and carries a financing adjustment for each night it stays open; the swap value is shown in the platform. The forward, such as AUS200-F or US500-F, has no nightly charge but a wider spread, because the holding cost is priced in. Both are commission-free. Pepperstone also lists perpetual CFDs on NAS100 and US500 with a funding rate set weekly in advance and applied daily at 5 pm New York time, although its Australian pages do not say whether retail clients can trade them.
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The usual calculation
Illustration only, using a hypothetical 6% annual rate rather than any broker's actual figure: a long position worth A$20,000 would pay about A$3.29 a night (20,000 x 6% / 365), roughly A$99 over 30 nights.
- Take the full notional value of the position, not the margin.
- Apply the annual rate: a benchmark interest rate for the index's currency, plus the broker's margin for longs, minus it for shorts.
- Divide by 365 (or 360 for some currencies) to get one night's charge.
- Multiply by the number of nights; weekend nights are applied too, often on one day of the week.
Cash CFD, forward or perpetual?
The decision rule is simple: estimate the financing you would pay over your planned holding period on the cash CFD, and compare it with the extra spread on the forward. Short holds favour cash; long holds usually favour forwards.
| Contract | Entry cost (example) | Holding cost | Best for |
|---|---|---|---|
| Cash CFD (AUS200) | 1-point minimum, 1.5 average | Financing each night | Intraday to a few days |
| Forward (AUS200-F) | 3-point minimum | Built into price | Weeks to months |
| Perpetual (US500, NAS100) | 0.015% commission per side | Funding set weekly, applied daily | Check retail eligibility first |
Other adjustments on index positions
- Dividend adjustments: when constituent companies go ex-dividend, long positions are typically credited and shorts debited.
- Currency: financing on a US index is charged in USD and converted if your account is in AUD.
- Weekends: three nights of financing can land in one go, which surprises traders holding over Friday.
Sources
Do I pay overnight funding on day trades?
No. Funding applies only to cash CFD positions still open at the daily cut-off.
Can overnight funding be paid to me?
On a short position it can be a credit when the benchmark rate is higher than the broker's margin, but it often remains a small cost.
Where do I see Pepperstone's financing rate?
In the symbol's specification in your trading platform, shown as the swap for long and short positions.
Financing costs on leveraged CFDs accumulate daily and can outweigh trading gains. The example above is illustrative, not a quoted rate. CFDs are high risk; this is not investment advice.