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 In finance, the spot date of a transaction is the normal settlement day when the transaction is carried out as soon as practical, i.e. "on the spot".UNDERSTANDING ACCOUNTING AND FINANCE: THEORY AND PRACTICEp.401/ref> This kind of transaction is call ...
. 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: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
/
CAD
Computer-aided design (CAD) is the use of computers (or ) to aid in the creation, modification, analysis, or optimization of a design. This software is used to increase the productivity of the designer, improve the quality of design, improve co ...
,
USD
The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
/
TRY
Try or TRY may refer to:
Music Albums
* ''Try!'', an album by the John Mayer Trio
* ''Try'' (Bebo Norman album) (2014) Songs
* "Try" (Blue Rodeo song) (1987)
* "Try" (Colbie Caillat song) (2014)
* "Try" (Nelly Furtado song) (2004)
* " Try (Ju ...
,
USD
The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
/
PHP
PHP is a 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 implementation is now produced by The PHP Group. ...
,
USD
The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
/
RUB, and offshore
USD
The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
/
KZT and offshore
USD
The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
/
COP and
USD
The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
/
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 estab ...
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 EBS may refer to:
Broadcasting
* EBS TV (Ethiopia)
* Educational Broadband Service, US TV service
* Educational Broadcasting System, South Korea
** EBS 1, a South Korean television channel
* Emergency Broadcast System, former US Warning system
...
and
Reuters Matching 2000/2
* ''Electronic trading systems'' – Executed via a single-bank