Foreign exchange spot
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 1.5 trillion USD, counting 37.4% of all foreign exchange transactions.
The standard settlement timeframe for foreign exchange spot transactions is T + 2 days; i.e., two business days from the trade date. A notable exception is the USD/CAD currency pair, which settles at T + 1.
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 Conversational Dealing
- Electronic broking systems – Executed via automated order matching system 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 Integral, FXall, Currenex, FX Connect, Globalink, and eSpeed
- Voice broker – Executed via telephone with a foreign exchange voice broker
- Foreign exchange market
- Foreign exchange trading
- Foreign exchange option
- Foreign exchange derivative
- Financial instruments
- "Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in 2010". Bank for International Settlements. Retrieved 17 September 2011.