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could somebody please tell me what is the main difference between Spot/Next and Tom/Next FX forward swaps? I know that both are used to roll spot FX position settlement to 1 day forward but I really appreciate some more information of the functions behind each of the swaps.

Thanks.

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Let’s say the settlement period is T+2, and you made a deal on the 8/10/2018. The spot date would be 10/10/2018 (assuming no holidays!), that’s when the physical exchange would happen. Now if you don’t want physical delivery, then tomorrow (9/10/18) you can use T/N (tommorow/next) swap to delay the physical delivery by one day, T/N is essentially swap between tomorrow and the next business day. You can keep rolling your position with T/N swap.

S/N (spot next) is the period from spot date to the next business day, so the delivery in the above example would be a day later (11/10/18) if you use S/N. O/N (overnight) is the period from today to next business day(tomorrow).

So in summary using T+2 conventions:

Spot: one exchange (only one leg) on T+2.

T/N: first leg of the swap on next business day, and the second leg on the following business day.

S/N: first leg of the swap on T+2, and the second leg on the following businesss day.

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  • $\begingroup$ Thank you very much for your explanation. I really appreciate it. But now when I am thinking about industry-standard charging 3-day swap for holding a position from Wednesday to Thursday it makes more sense to me when it would be charged from Thursday to Friday (consider using of Tom/Next swap for rolling). Is there anything I overlook? $\endgroup$ – FXtrader93 Oct 14 '18 at 19:23

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