Swap free means you will pay some other fixed commission instead of swaps. Somebody has to bear the costs of maintaining your position. There is no such thing as free lunch, right?
There is always a free lunch!
Normally it is on the side of the broker, he gets the bid-ask spread, he gets the commissions, he reduces the positive interest differential (swap) by charges to his benefit, he widens the negative swap by charges to his benefit, and so on.
The actual claim should be for a
swap FAIR account,
i.e. an account with swap rates based on pure interest diffs. Such an account would have identical swap rates on the long and the short side, only the sign would differ.
The funny point;
a swap fair account does not exist, while a swap free account does exist.
In its purest form it is an instrument for possible free lunches because not only the swap charges are lifted, but even the swaps themselves. It is just a question of the funds you have to provide as margin.
example:
USDCHF, the highest interst diff currently available in a liqud fx crosses: The diff is 2,25%pa - (-0,75%pa) = 3,00% pa.
Assume a volatility of 10%pa, then you should place at least 10% as margin with your sf broker. So you get a position with a yield of 0% and a risk of + - 100% (=+ -10%/10%). Placing additionally the opposite trade with a "normal" broker, where you can collect the interest diff, leaves you with a position yielding 30%pa (=3%/10%) and having a risk of + - 100% again.
For each broker each position is to be considered separately, but for you as trader, you can value them as a combined position:
So you have a combined position yielding 15%pa (3%/(10%+10%)) with a risk of 0%, as the positions are opposite, price plunges in one account are compensated by price gains in the other and vv. In case you are more cautios and you provide 15% as margin per account your yield falls to 10%pa, for achieving a yield of 30%pa you can only bring 5% as margin.
As long as you are able to avoid a forced close out by the broker, either by providing enough margin up front, by effective margin management (=balancing the two accounts swiftly), or by a mix of both, you are getting at least a very cheap lunch.
This is an effective financial advantage, that can be utilized for strategies, as long as it is not compensated by other costs, eg wider bid ask spreads, commissions, holding fees, limited holding periods, etc. On the other side there are mathematical and statistical means, which help to reduce the effect of such costs, as well.
So the real question should be, how is it possible that in our days in our civilzation (= City of London, as pars pro toto), someone still gets
DISCRIMINATED for his/her faith???
Why is it possible, that FCA regulated brokers can decide, which client gets which account?
No lawyers out there taking up this case?
