by 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.
The spot market is where financial instruments, such as commodities, currencies, and securities, are traded for immediate delivery. Delivery is the exchange of cash for the financial instrument. A futures contract, on the other hand, is based on the delivery of the underlying asset at a future date.
Exchanges and over-the-counter (OTC) markets may provide spot trading and/or futures trading.
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 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 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.
