Tom Next: A Short-Term Forex Transaction That Rolls a Position from Today to Tomorrow

Tom Next — short for Tomorrow–Next — is a foreign exchange (forex) transaction used to roll over an open position from one trading day to the next without settling it immediately.
It allows traders to extend their positions without taking physical delivery of the currency.

In simple terms, Tom Next means shifting a forex trade’s settlement date from today to tomorrow, keeping the position open.

Core Idea

In the forex market, most spot trades are normally settled two business days after the trade date (T+2).
However, traders who wish to hold a position overnight use a Tom Next swap to avoid actual delivery.

This is done by performing two linked transactions:

Selling (or buying) the currency for “tomorrow” settlement (T+1).

Buying (or selling) it back for “next day” settlement (T+2).

The difference between the two prices reflects the interest rate differential between the two currencies, known as the Tom Next rate.

In Simple Terms

Tom Next is like renewing your forex trade overnight — instead of closing it today, you roll it over to tomorrow and pay or earn a small interest adjustment.

Example

Suppose you’re long (bought) EUR/USD in the spot market but want to keep the position open overnight.
You enter a Tom Next swap that:

Sells EUR/USD for tomorrow’s settlement, and

Buys it back for the next day’s settlement.

If euro interest rates are lower than U.S. rates, you pay the difference (a small overnight cost).
If euro rates are higher, you earn the difference.

This adjustment — usually a tiny credit or debit — is known as the rollover fee or swap rate.

Real-Life Application

Tom Next is used by:

Forex traders who want to maintain open positions overnight.

Banks and brokers managing settlement obligations.

Institutions that use forex for funding or hedging.

It’s especially common in margin trading platforms (like CFDs or forex brokers), where positions are rolled automatically each night with a small interest adjustment.

Key Points

“Tom” = Tomorrow’s value date (T+1).

“Next” = Next day’s value date (T+2).

The Tom Next rate reflects interest rate differentials between the two currencies.

The rollover can add or subtract a small amount from your account depending on whether you hold the higher-yielding or lower-yielding currency.

Advantages

Lets traders maintain open positions without closing them daily.

Avoids physical currency settlement.

Provides a mechanism for calculating daily interest on open forex trades.

Risks and Considerations

The rollover cost or gain varies daily with interest rate changes.

Some brokers charge additional administrative fees on top of Tom Next rates.

During weekends or holidays, the rollover may cover multiple days at once, leading to larger adjustments.

Traders must account for these daily rollovers in long-term trading strategies.

Common Misconceptions and Mistakes

“Tom Next is a trading strategy.” It’s not — it’s a settlement adjustment mechanism.

“It only applies to professionals.” It affects every forex trader who holds positions overnight.

“The rollover is always a cost.” You can earn interest if you hold the higher-yielding currency.

“It changes the market price.” It adjusts only the value date, not the spot rate itself.

Related Queries Traders Often Search For

What does Tom Next mean in forex?

How is the Tom Next rate calculated?

What is the difference between Tom Next and spot?

Why do brokers apply rollover charges?

How does interest rate differential affect Tom Next?

Summary

Tom Next (Tomorrow–Next) is a forex mechanism that allows traders to roll over an open position to the next trading day instead of settling it.
It adjusts for interest rate differences between the two currencies, resulting in a small credit or debit to the trader’s account.
Tom Next is a key part of daily forex operations, keeping trades active without physical delivery.