Swap-free account

A swap-free account removes the overnight interest charge or credit that is normally applied at the daily rollover. Such accounts are mainly offered to clients who cannot pay or receive interest for religious reasons, which is why they are often called Islamic accounts.

How brokers cover the cost

The broker's own financing costs do not disappear, so most swap-free accounts recover them in another way:

• a fixed administration fee per lot after a set number of nights;
• wider spreads or higher commissions on the account;
• a limit on how long positions can stay open without fees;
• exclusion of certain instruments or pairs with large interest rate differentials.

Example

Illustrative figures: a broker charges no swap for the first 5 nights, then an administration fee of 8 dollars per standard lot per night. A trader holds 1 lot for 10 nights. On a normal account the swap might have been minus 4 dollars a night, or 40 dollars plus extra for any triple-swap Wednesdays. On the swap-free account there is nothing for 5 nights and then 5 times 8 = 40 dollars in fees. Depending on the pair and how long it is held, the swap-free account can work out cheaper, similar or more expensive.

Practical notes

• Eligibility is set by the broker. Some ask for a declaration, some offer the account to anyone, and some restrict it to clients in certain countries.
• Brokers usually prohibit using swap-free accounts for strategies built around interest differentials, such as carry trades, and may convert the account if they suspect misuse.
• Fee schedules differ greatly, so read them before choosing.

See swap and overnight financing and broker account types explained.