Understanding Spot FX Transactions

Business days do not include Saturdays, Sundays or bank holidays in either of the countries of the two currencies concerned.

• If a spot deal is made on Monday, Tuesday or Wednesday, delivery (value date) will be two days later on Wednesday, Thursday or Friday respectively.

• If a spot deal is made on Thursday or Friday, delivery will be two business days later on Monday, or Tuesday respectively.

• If the spot date falls on a public holiday in one of the centers of the two currencies involved, spot settlement is deferred and the next working day is taken as the value date. This must be the case, because settlement in any currency takes place in that currencies country of origin. For example, if a spot USD/EUR deal is transacted on Tuesday 26 November, it would be normally be for value Thursday 28 November. If this date is a holiday in Germany or the US however, all USD/EUR spot transactions on Tuesday 26 November are for value Friday 29 November.

There are some exceptions to the general rule:

• A transaction in USD/CAD is for immediate settlement usually implies delivery on the next working day after the dealing day. This is referred to as ‘Funds’. The large volume of foreign exchange between these two currencies has led to the evolution of an efficient system, and there is no time difference between the main money centers, New York and Toronto. A spot price (value two working days after the dealing date, as usual) can normally requested as an alternative to Funds.

• FX markets in the Middle East are closed on Friday but open on Saturdays. A USD/SAR transaction could therefore have a split settlement date, with the US dollars delivered on the Friday and the Saudi riyals delivered on the Saturday.

• The spot value date for cross-currency deals (transactions involving two currencies not including the US dollar) might be deferred by the US public holidays.