Market StructureSpot FXCash Market
Spot Market
The market for immediate delivery of currency, with spot FX trades conventionally settling two business days after the trade date.
What Spot Market means
The spot market is where currencies are bought and sold for near-immediate delivery. In foreign exchange the standard settlement convention is T+2, meaning value passes two business days after the trade date; USD/CAD and a few other pairs settle T+1. The spot rate is the benchmark price from which forwards, swaps and most derivatives are derived, and it is the price a retail platform quotes.
Retail traders almost never take delivery. Because a leveraged position left open past the daily cut-off would otherwise reach its value date, brokers roll it forward each day using a tom-next swap, producing the overnight financing debit or credit shown on the account. That is why a position held over Wednesday night typically incurs three days of swap: the new value date skips the weekend. The spot market itself trades continuously from Sunday evening to Friday evening New York time.
Worked example
A EUR/USD spot trade executed on Monday has a value date of Wednesday; held past 17:00 New York time, it is rolled to Thursday and the tom-next swap is applied.
Related terms
- Forward ContractAn agreement to exchange currencies at a fixed rate on a future date beyond the standard spot settlement window.
- RolloverThe daily process of moving an open position's settlement date forward, which generates the swap charge or credit.
- Tom-NextA one-day forex swap rolling a position's value date from tomorrow to the next business day, the basis of daily rollover.
- SwapThe interest credited or debited for holding a forex position overnight, based on the two currencies' rate differential.
- Interbank MarketThe wholesale tier of the foreign exchange market where large banks and institutions trade directly with one another.
Frequently asked questions
What does Spot Market mean in forex trading?
The market for immediate delivery of currency, with spot FX trades conventionally settling two business days after the trade date.
How does Spot Market work in practice?
Retail traders almost never take delivery. Because a leveraged position left open past the daily cut-off would otherwise reach its value date, brokers roll it forward each day using a tom-next swap, producing the overnight financing debit or credit shown on the account. That is why a position held over Wednesday night typically incurs three days of swap: the new value date skips the weekend. The spot market itself trades continuously from Sunday evening to Friday evening New York time.
What is an example of Spot Market?
A EUR/USD spot trade executed on Monday has a value date of Wednesday; held past 17:00 New York time, it is rolled to Thursday and the tom-next swap is applied.
Trade with a regulated broker
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