Tom/Next and Spot/Next are forex swap transactions used to roll over currency positions from one value date to another. Tom/Next (Tomorrow/Next) shifts a position's settlement from tomorrow to the next business day, while Spot/Next moves it from the spot date (typically two business days forward) to the next business day after that.
Forex swaps roll currency positions forward by shifting settlement dates from one business day to the next, incurring small interest-based adjustments.
These swaps involve simultaneously closing a position on one value date and reopening it on the next, incurring a small cost or credit based on interest rate differentials between the two currencies. Retail forex brokers automatically apply these rollover adjustments to open positions held overnight, which traders see as swap fees or credits on their accounts. The standard settlement period for spot forex transactions is two business days after the trade execution date, which is why these rollover mechanisms are necessary for positions held beyond that timeframe.
Think of it like extending a library book loan—you pay or receive a small adjustment to keep your position open beyond its original settlement date. Unlike outright forward contracts, which lock in exchange rates for future settlement without obligations before maturity, Tom/Next and Spot/Next swaps require daily rollover adjustments for positions held beyond their value dates.
In short: Tom/Next and Spot/Next are swap mechanisms that extend currency position settlement dates, resulting in overnight rollover charges or credits.
Example in Action
A South African trader holds a long position of 100,000 USD/ZAR at 18.5000 on Wednesday and wants to roll it to Thursday (tom/next) instead of settling spot on Friday.
The tom/next swap points are –2.5, meaning the trader pays 2.5 pips to roll the position forward one day, so the new rate becomes 18.4975.
This small adjustment reflects the interest rate differential between the US dollar and the South African rand for holding the position overnight.
The trader's position remains open for Thursday's trading session without triggering settlement.
The negative swap points indicate a rollover cost because the trader is long on the lower-yielding currency in this pair.
These swap points function similarly to forward points, which are used to calculate forward exchange rates for various future settlement dates based on the interest rate differential between the two currencies.
Why It Matters
Understanding why these rollover mechanisms exist isn't academic—it's about keeping the entire forex market from grinding to a halt.
Without Tom/Next and Spot/Next, traders would face forced delivery of currencies they never intended to hold. That means constant settlement chaos, liquidity drying up, and markets that can't function efficiently. It's infrastructure, not theory.
Common Questions
Do African Brokers Clearly Disclose Tom/Next Rollover Fees Before Account Opening?
Most African brokers do not clearly disclose Tom/Next rollover fees before account opening. Fee details typically appear within trading platforms or post-registration documentation, creating transparency gaps that disadvantage traders attempting pre-account cost comparisons across providers.
How Do Tom/Next Rates Differ Between South African Rand and Nigerian Naira?
Tom/Next rates for South African rand reflect deeper liquidity and transparent pricing tied to monetary policy, while Nigerian naira rates suffer from capital controls, poor liquidity, and regulatory volatility, resulting in wider spreads and unpredictable rollover costs for African traders.
Can Islamic Swap-Free Accounts in Egypt Avoid Tom/Next Charges Completely?
Yes, Islamic swap-free accounts in Egypt completely avoid Tom/Next charges to comply with Sharia law. However, brokers may apply alternative administrative fees, wider spreads, or commissions to offset the absence of swap income on these accounts.
Why Do Kenyan Traders Pay Higher Rollover Costs Than European Traders?
Kenyan traders face higher rollover costs due to less regulated broker markups, limited access to competitive low-cost platforms, higher local interest rate differentials, weaker liquidity conditions, and elevated banking fees compared to Europe's tightly regulated, competitive forex environment.
Do Ghanaian Forex Platforms Calculate Tom/Next Using Local or International Rates?
Ghanaian forex platforms calculate Tom/Next using international swap rates from global interbank markets, not local Ghanaian interest rates. This guarantees competitive pricing and liquidity, aligning Ghanaian brokers with worldwide forex standards and international currency pair benchmarks.
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