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 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
In financial markets T+2 is a shorthand for trade date plus two days indicating when securities transactions must be settled. The rules or customs in financial markets are for securities transactions to be settled within a commonly understood 'sett ...
; i.e., two business days from the trade date. Notable exceptions are
USD/
CAD,
USD/
TRY,
USD/
PHP
PHP is a General-purpose programming language, general-purpose scripting language geared toward web development. It was originally created by Danish-Canadian programmer Rasmus Lerdorf in 1993 and released in 1995. The PHP reference implementati ...
,
USD/
RUB, and offshore
USD/
KZT KZT may refer to:
* Kazakhstani tenge (ISO 4217: KZT), the currency of Kazakhstan
* Kuzhithura railway station (Station code: KZT), a railway station in Kanyakumari, Tamil Nadu, India
{{Disambiguation ...
and offshore
USD/
COP and
USD/
PKR currency pair
A currency pair is the dyadic quotation of the relative value of a currency unit against the unit of another currency in the foreign exchange market. The currency that is used as the reference is called the counter currency, quote currency, or ...
s, which settle at T+1.
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 Corporation. It employs around 2,500 journalists and 600 photojournalists in about 200 locations worldwide. Reuters is one of the largest news agencies in the world.
The agency was est ...
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 buy and sell orders for a stock market, commodity market or other financial exchange. The order matching system is the core of all electronic exchanges and ...
for foreign exchange dealers. Examples of such systems are
EBS and
Reuters Matching 2000/2
* ''Electronic trading systems'' – Executed via a single-bank
proprietary platform or a multibank dealing system. These systems are generally geared towards customers. Examples of multibank systems include Fortex Technologies, Inc., 360TGTX, FXSpotStream LLC, Integral,
FXall, HotSpotFX,
Currenex,
LMAX Exchange, FX Connect, Prime Trade, Globalink, Seamless FX, and
eSpeed
* ''Voice broker'' – Executed via telephone with a foreign exchange voice
broker
A broker is a person or firm who arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Neither role should be con ...
See also
*
Foreign exchange market
The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all as ...
*
Foreign exchange option
In finance, a foreign exchange option (commonly shortened to just FX option or currency option) is a derivative financial instrument that gives the right but not the obligation to exchange money denominated in one currency into another currency at ...
*
Foreign exchange derivative
A foreign exchange derivative is a financial derivative whose payoff depends on the foreign exchange rates of two (or more) currencies. These instruments are commonly used for currency speculation and arbitrage or for hedging foreign exchange ri ...
*
Financial instruments
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 ...
*
Foreign exchange aggregator
References
{{DEFAULTSORT:Foreign Exchange Spot Trading
Foreign exchange market
ru:Spot (сделка)