The spot market or cash market is a
public
In public relations and communication science, publics are groups of individual people, and the public (a.k.a. the general public) is the totality of such groupings. This is a different concept to the sociology, sociological concept of the ''Öf ...
financial market in which
financial instrument
Financial instruments are monetary contracts between parties. They can be created, traded, modified and settled. They can be cash (currency), evidence of an ownership, interest in an entity or a contractual right to receive or deliver in the form ...
s or
commodities are traded for
immediate delivery.
It contrasts with a
futures market, in which delivery is due at a later date. In a spot market,
settlement normally happens in
T+2 working days, i.e., delivery of cash and commodity must be done after two working days of the
trade date.
A spot market can be through an
exchange or
over-the-counter (OTC). Spot markets can operate wherever the
infrastructure
Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and pri ...
exists to conduct the transaction.
Exchange
Securities (i.e.
financial instrument
Financial instruments are monetary contracts between parties. They can be created, traded, modified and settled. They can be cash (currency), evidence of an ownership, interest in an entity or a contractual right to receive or deliver in the form ...
s) and
commodities are traded on an exchange using, making, and possibly changing the current
market price.
OTC
In the OTC i.e.,
over the counter market, trades are based on contracts made directly between two parties, and not subject to the rules of an
exchange. The contract terms are agreed between the parties and may be non-standard. The price will probably not be published.
Examples
Energy spot
The spot
energy market allows producers of surplus energy to instantly locate available buyers for this energy, negotiate prices within milliseconds, and deliver energy in a short-term timeframe.
Spot markets can be either privately operated or controlled by industry organizations or government agencies. They frequently attract
speculators, since spot market prices are known to the public almost as soon as deals are transacted. Examples of energy spot markets for
natural gas in Europe are the
Title Transfer Facility (TTF) in the
Netherlands
, Terminology of the Low Countries, informally Holland, is a country in Northwestern Europe, with Caribbean Netherlands, overseas territories in the Caribbean. It is the largest of the four constituent countries of the Kingdom of the Nether ...
and the
National Balancing Point (NBP) in the
United Kingdom
The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...
.
See also
*
Spot date
References
Foreign exchange market
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