There are some brokers who offer swap/interest free accounts.
I am just wondering who pay for the negative swap open position? The broker themselves?
I am just wondering who pay for the negative swap open position? The broker themselves?
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DislikedThere are some brokers who offer swap/interest free accounts.
I am just wondering who pay for the negative swap open position? The broker themselves?Ignored
DislikedThis is a terrific question. As I've stated before, the broker doesn't really "pay" anybody. They house the positions themselves until you reach a certain threshold. Their thinking is that for the most part, most trades in this category will be losing positions.
I'm convinced, however, that once you have reached a certain threshold of profitability, they HAVE to drop your position from the house and sell it to a bank, at which point THEY will be charged interest...that obviously won't fly, so they'll likely revoke your swap-free priviledges.
The reason I believe this is because I went 3 months on a swap-free account without ever a peep. My largest drawdown on my positions was about $50K. However, overtime, my positions turned positive and after a while, I had a PROFIT of over $30K on my positions (of course, all negative swaps, normally). Within 1 week of that turning point (when the Yen ticked up hard), I was told that my swap-free priviledges were revoked and from then on out, I'd be charged interest.
My guess is that if you trade negative swap pairs and your account shows a certain amount of profit (it's probably somewhere in the 10's of thousands), they will be forced to sell your positions to a tier 1 bank...that's when you'll run into problems...AND I suspect this will occur whether you're muslim or not.
This is my conjecture though...and it makes sense. If I were running a business, I'd keep losing positions in house as long as could so that the client would A either liquidate, or 2 they'd be hedged by other positions from my client base. This would be worth not collecting pennies on the swap spread.
Again, if you can manage to keep your negative swap positions in the red for long enough, my guess is that they won't complain.Ignored
QuoteDislikedMIG Investments offers the possibility of Islamic or swap-free accounts. Swaps will not apply to such accounts. For this service MIG Investments will charge a fee of 5 USD per traded lot round turn. MIG Investments reserves the right to discontinue an Islamic/swap-free account without warning. MIG Investments will invoke this right in case of suspicion of abuse.
DislikedGuess afterall, I still haven't get an answer.
Normal Swap Account
Client A get +swap on open buy position.
Client B pays -swap on open sell position.
Therefore, brokers get -swap from Client B and give it to Client A.
Swap-Free Account
Client A get +swap on open buy position.
Client B pays 0 swap on open sell position.
Client B doesn't pay swaps anymore, so who pays the +swap for Client A?
I am just trying to understand a little more on how Islamic Banking/Trading works.Ignored
Dislikedmaybe I sound a little confusing in my previous post.
My assumption is that Client A is with Broker A with a swap paying account and Client B with Broker B with a swap free account.
For eg Client A buy 1 lot of AUDJPY and Client B sell 1 lot of AUDJPY.
Client A would be getting +swap for his open buy position.
Client B suppose to be paying -swap for his open sell position would not be paying any swap due to the swap free account he has with Broker B.
If we work on brokers just match orders between buyers and sellers and sellers should pay swap to the buyers, someone has to fork out the swap Client A is getting.
And who is that someone?Ignored