At Core Spreads, we’re taking the jargon out of trading. We hope that means you get to enjoy an easy-to-follow trading experience.
We know that some elements of trading can get a little complicated, which is why we’ve taken some of the most common queries received by our Customer Support Team and broken them down.
Here, you’ll find out more about the charges on your account. If you’re looking for information on gapping and slippage, you can read more here.
We hope we’ve answered your questions below, but if there’s anything we’ve missed, you can contact us directly at firstname.lastname@example.org.
When you trade with us, you may see some charges posted on your account. Please be assured that these are very common.
There are two different charge formats, known as Dividend Adjustments and Overnight Financing. Here, we’ll take you through both the different formats and the variables within them:
One of the charges you see on your account may be due to Dividend Adjustments.
Individual Shares Dividends
From time to time, companies (such as Ford Motors and Invesco) pay dividends to their investors.
How do dividends work?
These dividends are based on how well that company has performed. A good way to think of them is as a reward for investing in that company. For example, if you’re prepared to ‘back’ that company, you’ll share a percentage of the company’s profits in the form of a dividend.
Have you heard the phrase ‘the Share has gone ex-dividend’? This means that the dividend has been removed from the company’s Share price. After a ‘Share goes ex-dividend’, the price of the company’s Share will drop, usually by the amount of the dividend.
What does that mean for you?
Let’s say you place a Buy trade on a Share that pays a dividend. If that Share ‘went ex-dividend’, you would experience an unfair loss as there would be a drop in the Share price, which isn’t a result of market sentiment but due to the Dividend Adjustment.
To compensate for the loss, a credit would be applied to your account. This credit is the equivalent of the dividend that has been paid. It may be less if there are any withholding taxes – these are normally 10% of the dividend.
The opposite applies if you open a Sell trade on a Share that pays a dividend. Here, you would benefit if the Share ‘went ex-dividend’ as the price would drop and you would have an unfair advantage. To correct this, a debit would be made on your account. This would be the equivalent of the dividend that’s been paid.
Index Dividend Adjustments
As shown above, when a ‘Shares goes ex-dividend’, the Share price falls by the dividend amount.
If this Share is part of an Index, the price of the Index would also be affected, but only on a pro rata (or proportional) basis. This is subject to the Share’s weighting, or importance, in that Index.
A trading example
For instance, let’s look at Microsoft. Microsoft is a Share in the Wall Street 30 Index. When Microsoft pays a dividend, the price of the Wall Street 30 will fall in proportion to Microsoft’s weighting within the Wall Street 30 Index.
The key points
We’ve covered a lot of information here, so let’s summarise the key points.
In both instances, your account is adjusted so that you don’t unfairly benefit or lose in the case of a ‘Share going ex-dividend’.
Another reason for charges appearing on your account is Overnight Financing.
Financing Fee (non-Forex)
When you place a trade, you’re ‘trading on leverage’. This means that you’re only required to deposit a small percentage of the total cost of opening the trade.
As a result, if you were opening a Buy trade, you're effectively 'loaned' the remaining balance needed to open the trade.
If you were opening a Sell trade, the opposite applies. With a Sell trade, you ‘lend’ the remaining balance of the trade back to Core Spreads. Depending on the current interest rates, you may receive a credit on your account.
Financing Fee (Forex)
If you’re a Forex trader, there is an additional step to consider.
With Forex trades, there are two instruments: you will always be Buying one currency and Selling the other currency in the trade.
This means you are ‘borrowing’ and ‘lending’ at the same time – you’re ‘borrowing’ the currency you wish to Buy and ‘lending’ the currency you want to Sell.
The charge you pay or the credit you receive is based on the difference of the two currencies’ interest rates.
Does this apply to all Forex markets?
Overnight Financing is only applied to ‘Rolling Cash’ Forex markets. If you choose to trade our Futures markets, there isn’t a charge. However, the price will typically be higher to take account of the Future expiry.
At Core Spreads, we want to give you the best trading experience. By answering some of your most common queries here, we hope you’ll be able to understand some of our processes.
As ever, if you have any queries or questions, please do feel free to contact us directly – we’re here for you 24/5.