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.