OANDA, one of the remaining few North American forex brokers, has notified its clients today that it will no longer be able to pay an interest on cash balances held on its books. Interest on currency pairs held in customer positions will continue to be calculated as Rollover.
This decision is not surprising at all considering that interest rate around the developed world are at an all time low. According to the OANDA announcement, the management costs of offering an interest on cash no longer justify the utility of it.
Offering interest on cash balances was once a popular promotional tool used by many brokers around the world. Right now however, the only brokers offering meaningful interest rates are Russians and those are mainly just on Ruble balances. When interest rates in the West will one day go back up to noticeable levels, most international brokers might be forced to bring back interest on cash balances too.
This is the full message the broker sent out to its clients today:
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“Dear Valued Client,
Due to the current interest rate environment with rates near or below zero, we will be setting OANDA cash balance rates to zero as of April 30, 2015. The administrative overhead to manage interest payments is significant across our 6 regulated entities. Setting account balance interest rate to zero enables us to continue to offer you tight spreads with no incremental fees.
We will continue to pay and charge interest on the currency pairs currently held in customer positions. OANDA calculates interest charged and paid continuously, second-by-second. This is in contrast to other financial markets, where interest payments are made at daily intervals with the shortest increment of one business day.
If you have any questions about this notice, please contact our Customer Support team whenever the markets are open.
Thank you for trading with OANDA.”