Rollover and the daily cut

Once every trading day a broker's systems perform a short housekeeping procedure on every account. Open positions have their value date advanced to the next business day, financing is calculated on each of them and posted, the day's realised results are stamped and closed, and the accounting day is rolled forward. The procedure is called rollover, and on most platforms it takes a small number of minutes.

Nothing about a position changes in market terms. It is not closed and reopened, its opening price is not restated, and its size is untouched. What changes is the date the position is deemed to settle on, and that date is what financing is calculated from. Rollover is an accounting event that happens to be visible in the market for reasons that have nothing to do with the accounting.

The snapshot the financing is calculated from 

Financing is charged on positions that are open at the cut off, and open at the cut off means open at one specific instant rather than at any point during the day. A position closed a minute before it carries no financing at all, and a position opened a minute before it carries a full night. There is no proration, because the underlying convention is a value date, and a value date is a whole day or nothing.

The size used is the position's size at that instant, so a position that was reduced during the day is financed on what remains rather than on what it was. Where several positions in the same instrument are held, most platforms finance each of them separately and post separate entries, though platforms that net positions into a single exposure finance the net. Which convention applies is a property of the account type and is stated in its documentation.

The rate used is the published rate for that instrument and direction as it stands at the cut off, not an average across the day. Where a rate was revised during the day, the revised rate applies to the whole night. This is why a table of rates read in the morning can disagree slightly with the entry posted that night.

What is posted to the account 

The financing entry lands as a separate line rather than as an adjustment to the position's opening price, which is the convention that keeps a statement auditable: the position's entry price remains the price it was actually opened at, and every night it survives adds its own dated line. A position held for a month therefore carries one opening line, one closing line and roughly thirty financing lines.

Some platforms display the accumulated financing inside the open position's floating result rather than in the balance, and move it into the balance only when the position closes. Others post it to the balance each night. The two look very different on screen and produce identical numbers at the end, because in both cases the account equity, the balance plus the floating result, has already absorbed it.

The last row is the point. Equity is the figure that margin is measured against, so both conventions affect margin identically and at the same moment. A reader watching only the balance will see one of them and not the other.

Why the market thins around the same minutes 

The accounting procedure would be invisible if it happened in isolation, but it does not. Firms across the industry roll at broadly the same moment, because they are all anchored to the same quiet point between the New York close and the Asian open. Many of them pause their own automated quoting while their books are being stamped, and the participants who would ordinarily be quoting are the same participants performing the procedure.

The result is a short window in which the number of firms willing to quote falls sharply, so spreads widen, depth thins and prices become more sensitive to small orders. Nothing about the market has changed in an economic sense. The supply of quotes has temporarily reduced, and a price is a function of who is quoting as much as of what is happening.

This has a direct consequence for resting orders. A stop triggered inside that window is filled against a thinner book than the same stop would meet an hour either side of it, and a market order in the same window reaches deeper levels for the same size. The widening is temporary and the effect on any single order is small in ordinary conditions, but it is systematic rather than random, and it recurs at the same time every day.

Two different things are called rollover 

The word carries a second meaning that is unrelated to the daily procedure, and the collision causes real confusion. Daily rollover is the value date advance described above and happens every night. Contract rollover is the periodic replacement of an expiring futures contract with the next one in the series, and it happens on a published schedule that is monthly or quarterly rather than daily.

The two are distinguishable by their effects. Daily rollover posts a financing entry and changes nothing about the instrument. Contract rollover changes which underlying contract the instrument references, which usually means a step in the quoted price and a compensating cash adjustment so that no result is created or destroyed by the change. An entry on a statement that names a rollover is one or the other, and the amount and the frequency identify which.

The time zone the cut off is stated in 

A platform's cut off is expressed in the platform's own time zone, which is set by the firm and is frequently not the account holder's. Where the platform time zone observes daylight saving and the account holder's does not, the cut off moves relative to the local clock twice a year, and the timestamps on a statement move with it. Nothing has changed except the offset between two clocks.

Because the trading day is defined by that cut off rather than by a calendar date, a trade closed shortly after it belongs to the following trading day on the statement even when the local date is unchanged. Reconciling a statement against a personal record requires reading the platform's stated time zone first, and it is stated in the platform documentation rather than inferred from the timestamps.