Daily Cut-Off

The”daily cut-off” is a specific time of day determined by a financial institution, after which any trade orders received will be processed on the next trading day instead of the current one.

This is especially relevant in the forex market, which operates 24 hours a day, but it can apply to other markets as well.

The daily cut-off time is significant for several reasons:

Settlement of Trades: It determines the value date for the trade, which is the day when the transaction will be settled. For example, in the spot forex market, if you make a trade before the daily cut-off time, it would typically be settled within two business days. However, if the trade is made after the daily cut-off, it would be settled within three business days instead.
Rolling Over Positions: In forex trading, any positions that are still open at the daily cut-off time are automatically “rolled over” to the next trading day. This involves a swap rate charge or credit, depending on the interest rate differential between the two currencies in the pair.
Calculating Interest: In forex trading, the daily cut-off time is also when the calculation of overnight interest takes place. Traders who hold positions over the cut-off time may either earn or pay interest, depending on the interest rate differential of the currency pair they are trading.

The specific daily cut-off time can vary depending on the financial institution, but it’s typically late afternoon or early evening Coordinated Universal Time (UTC).

It’s important for traders to be aware of the daily cut-off time used by their broker, as it can impact their trading strategy and costs.

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