A foreign exchange spot transaction, also known as FX spot, is an agreement between two parties to buy one currency against selling another currency at an agreed price for settlement on the
spot date. The
exchange rate
In finance, an exchange rate is the rate at which one currency will be exchanged for another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of ...
at which the transaction is done is called the spot exchange rate. As of 2010, the average daily turnover of global FX spot transactions reached nearly US$1.5 trillion, counting 37.4% of all foreign exchange transactions.
FX spot transactions increased by 38% to US$2.0 trillion from April 2010 to April 2013.
Settlement date
The standard settlement timeframe for foreign exchange spot transactions is
T+2; i.e., two business days from the trade date. Notable exceptions are
USD
The United States dollar (symbol: $; currency code: USD) is the official currency of the United States and several other countries. The Coinage Act of 1792 introduced the U.S. dollar at par with the Spanish silver dollar, divided it int ...
/
CAD,
USD
The United States dollar (symbol: $; currency code: USD) is the official currency of the United States and several other countries. The Coinage Act of 1792 introduced the U.S. dollar at par with the Spanish silver dollar, divided it int ...
/
TRY,
USD
The United States dollar (symbol: $; currency code: USD) is the official currency of the United States and several other countries. The Coinage Act of 1792 introduced the U.S. dollar at par with the Spanish silver dollar, divided it int ...
/
PHP
PHP is a general-purpose scripting language geared towards web development. It was originally created by Danish-Canadian programmer Rasmus Lerdorf in 1993 and released in 1995. The PHP reference implementation is now produced by the PHP Group. ...
,
USD
The United States dollar (symbol: $; currency code: USD) is the official currency of the United States and several other countries. The Coinage Act of 1792 introduced the U.S. dollar at par with the Spanish silver dollar, divided it int ...
/
RUB, and offshore
USD
The United States dollar (symbol: $; currency code: USD) is the official currency of the United States and several other countries. The Coinage Act of 1792 introduced the U.S. dollar at par with the Spanish silver dollar, divided it int ...
/
KZT and offshore
USD
The United States dollar (symbol: $; currency code: USD) is the official currency of the United States and several other countries. The Coinage Act of 1792 introduced the U.S. dollar at par with the Spanish silver dollar, divided it int ...
/
PKR currency pairs, which settle at T+1.
USD
The United States dollar (symbol: $; currency code: USD) is the official currency of the United States and several other countries. The Coinage Act of 1792 introduced the U.S. dollar at par with the Spanish silver dollar, divided it int ...
/
COP settles T+0.
Majority of SME FX payments are made through Spot FX, partially because businesses aren't aware of alternatives.
Execution methods
Common methods of executing a spot foreign exchange transaction include the following:
* ''Direct'' – Executed between two parties directly and not intermediated by a third party. For example, a transaction executed via direct telephone communication or direct electronic dealing systems such as
Reuters
Reuters ( ) is a news agency owned by Thomson Reuters. It employs around 2,500 journalists and 600 photojournalists in about 200 locations worldwide writing in 16 languages. Reuters is one of the largest news agencies in the world.
The agency ...
Conversational Dealing
* ''Electronic broking systems'' – Executed via automated
order matching system
An order matching system or simply matching system is an electronic system that matches order (exchange), buy and sell orders for a stock market, commodity market or other financial exchanges. The order matching system is the core of all electron ...
for foreign exchange dealers. Examples of such systems are
EBS and
Reuters Matching 2000/2
* ''Electronic trading systems'' – Executed via a single-bank