Community Forex Questions
What is tom-next?
Tom-next is an abbreviation for 'tomorrow-next day,' which is a short-term forex transaction that allows traders to buy and sell a currency on two separate business days: tomorrow and the next.
The goal of tom-next is to keep traders' forex positions open overnight without requiring them to take physical delivery of currency. Forex trades, like commodity trades, would normally result in the trader taking delivery of the asset traded. The expected delivery day in forex is two days after any transaction, known as the spot date, but tom-next can be used to extend the trade past this date.
Instead of taking delivery of the currency they traded, tom-next allows the position to be extended, and the provider swaps any overnight positions for an equivalent contract that begins the following day. The difference between these two contracts, when calculated, is the tom-next adjustment rate.
Tom-next (short for "Tomorrow-Next") refers to a type of foreign exchange (forex) swap transaction that involves the simultaneous buying and selling of a currency pair, but with different value dates. In a tom-next swap, one leg of the trade is settled "tomorrow" (T+1) and the other "next" (T+2). This strategy is often used by traders and financial institutions to manage short-term liquidity needs or to roll over positions without taking delivery of the actual currency. Tom-next swaps are a way to minimize the exposure to overnight risk in forex markets while maintaining a continuous position in a currency pair.
Tom-next, short for “tomorrow-next,” is a term used in forex trading to describe a type of short-term swap transaction. It occurs when a trader rolls over an open position from the current value date (today) to the next business day (tomorrow). Instead of closing the trade, the broker extends it, adjusting for the difference in interest rates between the two currencies. This adjustment is called the tom-next swap, and it ensures the trader maintains the position without taking delivery of the currency. Tom-next is common among traders who keep positions overnight, as it allows flexibility while managing costs linked to interest rate differentials. It’s a key tool for handling liquidity and settlement in forex markets.

Add Comment

Add your comment