# Arbitraging OANDA continuous rollover vs other brokers' discrete rollover

Most brokers compute rollover once a day (2200 GMT), but OANDA calculates it continuously.

 Professional traders can exploit this flexibility by arbitraging the
continuous and discrete interest-calculation scenarios through two
trading lines--one with an established player, such as Citibank or
UBS, and the other with OANDA. Whenever they sell a
high-interest-rate currency (such as South African Rand) they can do
so with the traditional player, where they will pay no intra-day
interest for shorting that currency. On the other hand, they can
always buy a high-interest-rate currency through OANDA, where they
earn the "carry" (interest-rate differential) for the position,
however briefly they may hold it.


Has anyone done this? I realize the bid/ask spread on both sides would have to be small, but this still seems viable?

My form of arbitrage is slightly different: hold a high-interest position w/ a regular broker for 1 minute on each side of rollover time, just to get the rollover (for the entire 24 hour period). Take the opposite position w/ OANDA. You'll pay rollover, but for only 2 minutes.

EDIT: Apologies, I never got around to test this. Has anyone else had a chance? I realize oanda.com's higher spreads (which are non-negotiable) may cover the arbitrage.

-
Transaction costs are indeed the barrier to most forms of arbitrage. Have you backtested your strategy with historical data? –  chrisaycock Mar 13 '11 at 17:22
@chrisaycock Nope. I plan to "forward test" in about 3h35m10s... Backtesting may be difficult since different brokers have different bid/ask spreads and different rollover rates. I'm not sure how much historical data they keep on either. –  barrycarter Mar 13 '11 at 17:25
how did it end up going? –  emaster70 Aug 2 '11 at 8:36

There are several things you need to consider.

• You need to use a large leverage to make it work.
• If you use a leverage, there is substantial risk that one side of your trade cannot withstand the fluctuation of the market. So, your balance on one side will turn to 0 at some point and you need to deposit money using the profit you earned from another account. And there is transaction cost.
• The difference is not enough for you to be profitable at all on oanda since Oanda doesn't have a low interest. It is just rolling over time.
• You might want to try some small brokers that pays much. But usually a higher interest pay is associated with a higher spread. And the small brokers you invest is not secure for you money. If you are really interested, you can try InstaFX. This is a company with no regulation. But it pays well on come currencies like GBPAUD. But again don't forget about spread and this type of company sometimes have commission. (Yes, commission plus spread)
-