What Is Rollover Interest In The Forex Market?

Hello friends, how are you doing today? I had a chat with one of my Forex students based in Philippines and he had some questions relating to the above topic. I am therefore delighted to bring you a very educative article on this topic from Martin Maier, a person whose experience in Forex and writing skill would ensure your full understanding in this area that has confused many interested in Forex. Excerpts:

In the spot Forex market, all trades must be settled in two business days. A rollover refers to the process of closing open position for today's value date and the opening of the same position for the next day's value date at a price reflecting the difference in interest rates between the two currencies.
In accordance with international banking practices, Forex brokers automatically rolls over all open positions to the next date at 5 PM EST for settlement.
Rollover involves exchanging the position being held for a position expiring the following settlement date. For example, for trades executed on Monday, the value date is Wednesday.
However, if a position is opened on Monday and held overnight, the value date is now Thursday. The exception is a position opened and held overnight on Wednesday. The normal value date would be Saturday; because banks are closed on Saturday the value date is actually the following Monday. Due to the weekend, positions held overnight on Wednesday incur or earn an extra two days of interest.
Trades with a value date that falls on a holiday will also incur or earn additional interest. Forex Traders can earn interest on rollovers, depending on the direction of their positions and interest rate differential between the two currencies involved.
For instance, the primary interest rates in Great Britain are much higher than in Japan, so if a trader buys GBP, he/she will earn interest at 5 PM EST time. on the other hand, if he/she sells GBP in this currency pair, he/she will pay interest at 5 PM EST time.
Overnight Interest/Rollover is automatically paid to a client's account after buying a currency with greater Interest Rate in its country, and charged to a client's account if the country issuing this currency has smaller Primary Interest Rates.