What are spreads?
The spread is the difference between the Bid price (selling price) and the Ask price (buying price) of the CFD. Several factors might influence the size of the spread, such as:
- Instrument’s liquidity: Popular instruments are traded with lower spread, rare ones have higher spreads.
- Market volatility: During volatile market conditions, the spread tends to be wider than in quieter market conditions.
- Stock prices: When a share’s price is low the spread might increase, as it’s related to the idea of low-priced securities being new or less liquid.
This fee is automatically charged when a transaction of any kind is opened.
The spread will vary both in value and type depending on the instrument you’re trading, and can be fixed or variable.
How do spreads work?
Let us assume that asset A is quoted 10.00/11.00, with 10.00 being the price used to SELL and 11.00 being the price used to BUY.
When a transaction is opened, the spread will be automatically debited from your account.
Using the amounts mentioned in the example above, here are 2 examples of how the spreads function:
- To buy 5 units of asset A at 11.00 (opening price for BUY trades), paid spread will be 5 x (11.00-10.00) = 5
- To sell 5 units of asset A at 10.00 (opening price for SELL trades), paid spread will be 5 x (11.00-10.00) = 5
2. Overnight Swap
What is an Overnight Swap?
This refers to an interest applied to a trader’s account for the positions that he holds overnight and it occurs because of the leverage effect, the main characteristic of CFD instruments (margin trading).
To be more precise, a trader uses a fraction of his funds to open a CFD position (this acts as the used margin), borrowing the full contract value from Clicktrades.
The swap charge fee becomes active only if the CFD trade is kept overnight, and depends on the Official Interest Rate of the instrument’s base currency.
How does it work?
For each day a position is held open overnight, the calculation is based on the following formula:
- Overnight Swap = Volume x Instrument Mid Closing Price (average between Buys and Sell closing price) x Instrument Overnight Interest
As most banks across the world are closed on Saturdays and Sundays, there will be no rollover on these days but the banks will still apply interest. To account for that, the Forex market reserves three (3) days’ worth of rollover interest on Wednesday, while for the rest of the CFD instruments (shares, indices, commodities, bonds, ETFs, etc) the three days’ worth of rollover interest will be reserved for Friday.
Because of this, there are triple swap charges for Forex pairs on Wednesday and for the rest of CFD instruments on Friday.
3. Conversion Fee
Clicktrades will apply a conversion fee whenever your account’s currency differs from the one of the traded instruments. The conversion fee applies for Webtrader users and is a fixed fee set at 0.5%.
How does it work?
Let us assume that a Client’s account currency is EURO and that the Client wants to open a BUY position on asset B (a CFD instrument on a US share), which is denominated in USD. The Client chooses a volume of 10 contracts and at the opening time asset B quotes 10.50/11.50 USD, with leverage 1:10 and the EUR/USD pair trading at 1.115000, then:
- Used Margin = Volume x Mid Price* x Leverage = 10 x 11 USD x 10% = 11 USD
- Used Margin Converted into Euro = 11 USD / 1.15 (EUR/USD rate) = 9.57 EUR
- Conversion Fee on Used Margin = 9.57 x 0.5% = -0.048 EUR
If we assume that the quotes of asset B change to 12.50/13.50 USD per share, then:
- Profit/Loss = Volume x (Market price – Opening Price) = 10 x (12.50 – 11.50) = 10 USD
- Profit/Loss Converted into Euro = 10 USD / 1.15 (EUR/USD rate) = 8.69 EUR
- Conversion Fee on Profit/Loss = 8.69 x 0.5% = -0.043 EUR
If we assume that the Company pays dividend of 0.25 USD/share, then:
- Dividend adjustment = Volume x Dividend = 10 x 0.25 USD = 2.5 USD
- Dividend Adjustment Converted into Euro = 2.5 / 1.15 (EUR/USD rate) = 2.17 EUR
- Conversion fee on Dividend Adjustment = 2.17 x 0.5% = -0.01 EUR
Assuming position is held overnight, Overnight Interest Rate for Buy positions being -0.015%, asset quotes remaining at midnight 12.50/13.50 USD per share, then:
Overnight Swap = Volume x Interest Rate (Buy) x Mid Price ** at midnight = 10 x -0.015% x (12.50+13.50)/2 = -0.019 USD
Overnight Swap converted into Euro = -0.019 / 1.15 (EUR/USD rate) = -0.016 EUR
Conversion Fee on Overnight Swap = -0.016 x 0.5% = = -0.00008 EUR
* Mid Price = Average between BUY and SELL price = (Buy price + Sell price)/2
4. Inactivity Fee
If a Client Account has an inactive status coming from the lack of Order execution for a timeframe of three months (90 days) or more, Clicktrades will charge each inactive account for a fee relating to maintenance, administration and compliance management of these accounts. All inactive accounts will be subject to a monthly charge of 30 USD or its equivalent in the currency of the trading account.
How does it work?
- When the balance of any Inactive Account to which Inactivity Fee is applicable, is less than 30 USD, then the Inactivity Fee for this Inactive Account shall be equal to the amount of the remaining balance on the mentioned Inactive Account. We reserve the right to charge the Inactivity Fee retroactively for any month in which we had the right to charge it but did not do so for technical reasons, as mentioned above.
- If we assume that the trader’s account is inactive for one year or more, Clicktrades reserves the right (after calling or emailing the Client using the last known contact details) to close the Client’s Account. Any money to the credit of the Client Account will be remitted by Clicktrades to the client’s bank account, from where they originated unless instructed otherwise in writing by the Client.