Tom-Next is a foreign exchange swap that extends the settlement of a spot currency position from the current settlement date (tomorrow) to the next business day. This overnight rollover mechanism allows traders to maintain currency positions beyond standard spot settlement periods without taking physical delivery. Tom-Next rates reflect interest rate differentials between currencies.

Tom-Next swaps are essential for forex trading as they enable position management across settlement periods and affect the cost of holding leveraged currency positions overnight. These rates influence carry trade profitability and overnight financing costs for retail and institutional forex traders.

Real-world example: A forex trader holding a long EUR/USD position pays Tom-Next swap costs of $3 per standard lot to roll the position overnight, reflecting the interest rate differential between Euro and U.S. Dollar rates.