Spot market
Encyclopedia
The spot market or cash market is a public
financial market
, in which financial instruments
or commodities are traded for immediate delivery
. It contrasts with a futures market in which delivery is due at a later date. A spot market can be:
Spot markets can operate wherever the infrastructure
exists to conduct the transaction. The spot market for most instruments exists primarily on the Internet
.
.
market, trades are based on contracts made directly between two parties, and not subject to the rules of an exchange
. The contract terms are agreed between the parties and may be non-standard. The price will probably not be published.
imposes a two-day delivery period, originally due to the time it would take to move cash from one bank to another. Most speculative retail forex trading is done as spot transactions on an online trading platform.
allows producers of surplus energy to instantly locate available buyers for this energy, negotiate prices within milliseconds and deliver actual energy to the customer just a few minutes later. Spot markets can be either privately operated or controlled by industry organizations or government agencies. They frequently attract speculators, since spot market prices are known to the public almost as soon as deals are transacted. Examples of energy spot markets for natural gas
in Europe are the Title Transfer Facility
(TTF) in the Netherlands
and the National Balancing Point
(NBP) in the United Kingdom
.
Public market
Public markets are markets, in public spaces, where independent merchants can sell their products to the public. Typical products sold at public markets include fresh produce and baked goods, locally raised meats and dairy products, and various other food items and handcrafted goods...
financial market
Financial market
In economics, a financial market is a mechanism that allows people and entities to buy and sell financial securities , commodities , and other fungible items of value at low transaction costs and at prices that reflect supply and demand.Both general markets and...
, in which financial instruments
Financial instruments
A financial instrument is a tradable asset of any kind, either cash; evidence of an ownership interest in an entity; or a contractual right to receive, or deliver, cash or another financial instrument....
or commodities are traded for immediate delivery
Spot date
In finance, the spot date of a transaction is the normal settlement day when the transaction is done today. This kind of transaction is referred to as a spot transaction or simply spot....
. It contrasts with a futures market in which delivery is due at a later date. A spot market can be:
- an organized market, an exchangeExchange (organized market)An exchange is a highly organized market where tradable securities, commodities, foreign exchange, futures, and options contracts are sold and bought.-Description:...
or - "over the counter", OTCOver-the-counter (finance)Within the derivatives markets, many products are traded through exchanges. An exchange has the benefit of facilitating liquidity and also mitigates all credit risk concerning the default of a member of the exchange. Products traded on the exchange must be well standardised to transparent trading....
.
Spot markets can operate wherever the infrastructure
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...
exists to conduct the transaction. The spot market for most instruments exists primarily on the Internet
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
.
Exchange
Securities (i.e. commodities) are traded on exchanges using recent market priceMarket price
In economics, market price is the economic price for which a good or service is offered in the marketplace. It is of interest mainly in the study of microeconomics...
.
OTC
In the over the counterOver-the-counter (finance)
Within the derivatives markets, many products are traded through exchanges. An exchange has the benefit of facilitating liquidity and also mitigates all credit risk concerning the default of a member of the exchange. Products traded on the exchange must be well standardised to transparent trading....
market, trades are based on contracts made directly between two parties, and not subject to the rules of an exchange
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...
. The contract terms are agreed between the parties and may be non-standard. The price will probably not be published.
Spot Forex
The spot foreign exchange marketForeign exchange market
The foreign exchange market is a global, worldwide decentralized financial market for trading currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends...
imposes a two-day delivery period, originally due to the time it would take to move cash from one bank to another. Most speculative retail forex trading is done as spot transactions on an online trading platform.
Energy Spot
The spot energy marketEnergy market
Energy markets are those commodities markets that deal specifically with the trade and supply of energy. Energy market may refer to an electricity market, but can also refer to other sources of energy...
allows producers of surplus energy to instantly locate available buyers for this energy, negotiate prices within milliseconds and deliver actual energy to the customer just a few minutes later. Spot markets can be either privately operated or controlled by industry organizations or government agencies. They frequently attract speculators, since spot market prices are known to the public almost as soon as deals are transacted. Examples of energy spot markets for natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
in Europe are the Title Transfer Facility
Title Transfer Facility
The Title Transfer Facility, more commonly known as TTF, is a virtual trading point for natural gas in the Netherlands. Set up by Gasunie in 2003, it is almost identical to the National Balancing Point in the United Kingdom and allows gas to be traded within the Dutch network. The TTF is operated...
(TTF) in the Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
and the National Balancing Point
National Balancing Point (UK)
The National Balancing Point, commonly referred to as the NBP, is a virtual trading location for the sale and purchase and exchange of UK natural gas...
(NBP) in the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
.