Wednesday, August 14, 2013
Spot Market by Forex
Currency spot trading is the most popular foreign currency instrument
around the world, making up 37 percent of the total activity (See Figure 3.1).
1 2 3 4
Figure 3.1.The market share of the foreign exchange instruments as of 1998:
1- spot; 2 – options; 3 – futures; 4 – forwards and swaps.
The fast-paced spot market is not for the fainthearted, as it features
high volatility and quick profits (and losses). A spot deal consists of a bilateral
contract whereby a party delivers a specified amount of a given currency
against receipt of a specified amount of another currency from a
counterparty, based on an agreed exchange rate, within two business days of
the deal date. The exception is the Canadian dollar, in which the spot delivery
is executed next business day.