Forex market: What is Cash-Spot?

Cash-Spot is one of the lesser known technical concepts in the forex market. Nothing earth shattering, really, but it is always good to know the technical details of the market we operate in.

Kshitij.com

More about the Brokerage...

Source: Kshitij.com

Share . Email . Print . A+

Cash-Spot is one of the lesser known technical concepts in the forex market. Nothing earth shattering, really, but it is always good to know the technical details of the market we operate in. The forex rates that we see in the normal course, quoted on the screens, in forecasts or in the papers, are all Spot rates (unless specifically mentioned otherwise) and do not pertain to today. Strange? To explain a little clearly, we introduce a few definitions, alongwith examples.

CASH-SPOT: DEFINITIONS AND EXAMPLES

Term

Definition

Example

Cash date or Trade date

The date of the transaction, say “today”

If today is 25-June-12, then Cash date is 25-June-12

Spot date

Second working day from the Cash date, or day after tomorrow

27-Jun-12

Tom date

Tom is short for “tomorrow” and is the next working day from the Cash date

26-Jun-12

Spot Rate

The rate quoted and transacted today for settlement (debit/ credit) on the Spot date

Say, the rate is 55.95. This is the rate we normally see, hear and talk about.

Cash Rate

The rate applicable for settlement (debit/ credit) today itself, on the Cash date

This is usually lower than the Spot Rate. Since the Spot Rate is 55.95, the Cash Rate may be 55.93. The difference between the two rates is known as the Cash-Spot rate or Cash-Spot difference.

Tom Rate

The rate quoted and transacted today for settlement (debit/ credit) tomorrow, on the Tom date

This is lower than the Spot Rate, but higher than the Cash Rate. Since the Spot Rate is 55.95, the Tom Rate may be 55.94.