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{{Short description|Financial agreement}}
{{Foreign Exchange}}
{{Foreign Exchange}}
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.<ref name="BISReport" /> FX spot transactions increased by 38% to 2.0 trillion USD from April 2010 to April 2013.<ref name="BISReport2" />
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.<ref name="BISReport" /> FX spot transactions increased by 38% to US$2.0 trillion from April 2010 to April 2013.<ref name="BISReport2" />


== Settlement date ==
== 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 [[United States dollar|USD]]/[[Canadian dollar|CAD]], [[United States dollar|USD]]/[[Turkish lira|TRY]], [[United States dollar|USD]]/[[Philippine peso|PHP]], [[United States dollar|USD]]/[[Russian ruble|RUB]], and offshore [[United States dollar|USD]]/[[Kazakhstani tenge|KZT]] and [[United States dollar|USD]]/[[Pakistani rupee|PKR]] [[currency pair]]s, which settle at T+1<ref>https://www.hsbcnet.com/gbm/attachments/rise-of-the-rmb/currency-guide-2012.pdf?WT.ac=CIBM_gbm_pro_rmbrise_pbx01_On</ref>. Majority of SME FX payments are made through Spot FX, partially because businesses aren't aware of alternatives <ref name="MoneyTransferComparison" />.
The standard settlement timeframe for foreign exchange spot transactions is [[T+2]]; i.e., two business days from the trade date. Notable exceptions are [[United States dollar|USD]]/[[Canadian dollar|CAD]], [[United States dollar|USD]]/[[Turkish lira|TRY]], [[United States dollar|USD]]/[[Philippine peso|PHP]], [[United States dollar|USD]]/[[Russian ruble|RUB]], and offshore [[United States dollar|USD]]/[[Kazakhstani tenge|KZT]] and offshore [[United States dollar|USD]]/[[Pakistani rupee|PKR]] [[currency pair]]s, which settle at T+1. [[United States dollar|USD]]/[[Colombian peso|COP]] settles T+0.
<ref>{{Cite web |url=https://www.hsbcnet.com/gbm/attachments/rise-of-the-rmb/currency-guide-2012.pdf?WT.ac=CIBM_gbm_pro_rmbrise_pbx01_On |title=Archived copy |access-date=2018-07-10 |archive-date=2017-03-13 |archive-url=https://web.archive.org/web/20170313145206/https://www.hsbcnet.com/gbm/attachments/rise-of-the-rmb/currency-guide-2012.pdf?WT.ac=CIBM_gbm_pro_rmbrise_pbx01_On |url-status=dead }}</ref> Majority of SME FX payments are made through Spot FX, partially because businesses aren't aware of alternatives.<ref name="MoneyTransferComparison" />


== Execution methods ==
== Execution methods ==
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* ''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 [[Thomson Reuters|Reuters]] Conversational Dealing
* ''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 [[Thomson Reuters|Reuters]] Conversational Dealing
* ''Electronic broking systems'' – Executed via automated [[order matching system]] for foreign exchange dealers. Examples of such systems are [[Electronic Broking Services|EBS]] and [[D2000-2|Reuters Matching 2000/2]]
* ''Electronic broking systems'' – Executed via automated [[order matching system]] for foreign exchange dealers. Examples of such systems are [[Electronic Broking Services|EBS]] and [[D2000-2|Reuters Matching 2000/2]]
* ''Electronic trading systems'' – Executed via a single-bank [[Proprietary software|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]]
* ''Electronic trading systems'' – Executed via a single-bank [[Proprietary software|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]]
* ''Voice broker'' – Executed via telephone with a foreign exchange voice [[broker]]


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<ref name="BISReport">{{cite web|title=Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in 2010|url=http://www.bis.org/publ/rpfxf10t.pdf|publisher=Bank for International Settlements|accessdate=17 September 2011}}</ref>
<ref name="BISReport">{{cite web|title=Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in 2010|url=http://www.bis.org/publ/rpfxf10t.pdf|publisher=Bank for International Settlements|accessdate=17 September 2011}}</ref>
<ref name="BISReport2">{{cite web|title=Triennial Central Bank Survey Global foreign exchange market turnover in 2013|url=http://www.bis.org/publ/rpfx13fx.pdf|publisher=Bank for International Settlements|accessdate=30 September 2013}}</ref>
<ref name="BISReport2">{{cite web|title=Triennial Central Bank Survey Global foreign exchange market turnover in 2013|url=http://www.bis.org/publ/rpfx13fx.pdf|publisher=Bank for International Settlements|accessdate=30 September 2013}}</ref>
<ref name="MoneyTransferComparison">>{{cite web|title=Spot FX transactions for Payments or Hedged Transaction?|https://moneytransfercomparison.com/spot-fx-transactions/|accessdate=14 December 2019}}</ref>
<ref name="MoneyTransferComparison">{{cite web|title=Spot FX transactions for Payments or Hedged Transaction?|url=https://moneytransfercomparison.com/spot-fx-transactions/|accessdate=14 December 2019}}</ref>
}}
}}


Latest revision as of 21:58, 7 June 2024

Foreign exchange
Exchange rates
Markets
Assets
Historical agreements
See also

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.[1] FX spot transactions increased by 38% to US$2.0 trillion from April 2010 to April 2013.[2]

Settlement date

[edit]

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/CAD, USD/TRY, USD/PHP, USD/RUB, and offshore USD/KZT and offshore USD/PKR currency pairs, which settle at T+1. USD/COP settles T+0. [3] Majority of SME FX payments are made through Spot FX, partially because businesses aren't aware of alternatives.[4]

Execution methods

[edit]

Common methods of executing a spot foreign exchange transaction include the following:[1]

  • 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

See also

[edit]

References

[edit]
  1. ^ a b "Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in 2010" (PDF). Bank for International Settlements. Retrieved 17 September 2011.
  2. ^ "Triennial Central Bank Survey Global foreign exchange market turnover in 2013" (PDF). Bank for International Settlements. Retrieved 30 September 2013.
  3. ^ "Archived copy" (PDF). Archived from the original (PDF) on 2017-03-13. Retrieved 2018-07-10.{{cite web}}: CS1 maint: archived copy as title (link)
  4. ^ "Spot FX transactions for Payments or Hedged Transaction?". Retrieved 14 December 2019.
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