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