Swap

The financing on an open position, applied once a day. A position funded on margin is a position financed by someone, and the charge or credit for that financing is what platforms label swap. In foreign exchange it arises naturally from the structure of the trade, since holding a pair means being long one currency and short the other, so one side earns its rate and the other pays its rate and the interest rate differential between them is what remains. On a share or index contract the same idea is applied differently: a reference rate plus or minus a margin is applied to the value of the contract.

The size of the entry follows from the notional value of the position and the annualised rate, apportioned to a single day, then adjusted by the provider's own charge. One weekday of the week carries three days at once, because the value date of the position being rolled that day lands after the weekend and the weekend's financing settles with it. Published rates change whenever a central bank moves, which is why a position that carried a credit when it was opened can carry a debit later without anything else about it changing.

Two things are consistently missed. The figure applied is the market differential after the provider's adjustment, and because that adjustment is applied in both directions it is entirely possible for the same instrument to carry a debit whichever way it is held. And the charge is invisible in the price: no chart shows it, so a position that looks flat on price has not been flat on cost. Over a day it is immaterial next to the distance prices travel; over months it is not, which is why it belongs in the arithmetic of any position intended to be held.