Account currency

An account is denominated in one currency, fixed when it is opened, and the balance, the equity and the margin figures are all expressed in it. Instruments are not. A currency pair settles its result in the currency written second in the pair, a contract on a listed share settles in the currency of the exchange that lists it, and a metal contract settles in the currency it is quoted in.

Anything that does not already arrive in the account currency is converted at a rate taken at the moment the entry is booked, and the conversion applies to the result rather than to the position itself. The rate used is the provider's own. The distance between that rate and the mid rate is a real cost that appears as no separate line on a statement, because it has already been applied to the figure the statement shows.

The effect that surprises people is that the account currency introduces a second exposure. A result earned in one currency and converted into another is worth whatever that pair happens to be doing at the moment of conversion, so two identical positions closed at identical prices credit different amounts to two accounts denominated differently. Practitioners disagree about how much this matters: over a short holding period the conversion drift is small beside the spread, while over months it is not obviously smaller than the costs traders scrutinise far more closely.