Tom/Next

Summary

Tom/Next (T/N) is the short-end tenor spanning the next business day to spot. Unlike most other short-end tenors, it carries two distinct roles rather than one: as a time reference it is the standard settlement convention for rolling an open spot position forward to the next business day; as a funding mechanism it is the period over which interest accrues on cash held overnight. Both roles matter together — a Tom/Next roll is not a simple date relabelling, it has a real funding cost or benefit attached to it.

Detail

What Tom/Next is

Tom/Next is one of the standard short-end tenor labels (alongside O/N and S/N), covering the window from the next business day to spot. See Tenor for how it fits among the other standard labels, and Valuation spot date and overnight for the O/N/T/N outright formulas that use it as a date-window input to price spot today or tomorrow.

Dual role

A time reference: the standard settlement convention for rolling an open spot position to the next business day, once a spot trade has not yet delivered by end of day.
A funding mechanism: interest accrues on accumulated cash up to the Tom/Next date. This is distinct from Tom/Next's use as a date-window input to the O/N/T/N outright formulas: those formulas use T/N to price a rate; the funding role is about what happens economically over the T/N window itself, independent of any one outright calculation.

Why both roles matter together

A position rolled on a Tom/Next basis is not simply relabelled to a new date — the funding role means the roll has a real economic cost or benefit, since interest genuinely accrues on the cash over that window. Treating Tom/Next purely as a settlement-convention date label, without its funding role, would miss why an open spot position held overnight carries a funding charge or credit at all.