A spot market, also known as a cash market, is a public financial market where financial instruments or commodities are traded for immediate delivery. This means that the exchange of the asset and the cash payment occur almost simultaneously. Spot markets can involve various assets such as commodities, currencies, and securities, and the transactions can take place on an exchange or over-the-counter (OTC) .
Key characteristics of spot markets include:
- Settlement at the ruling price known as the spot price or spot rate.
- Immediate delivery of the asset upon agreement of the trade.
- Real-time prices reflecting genuine supply and demand.
Spot markets are distinct from futures markets, where delivery is due at a later date. They are popular among day traders due to the ability to open short-term positions with low spreads and no fixed expiries. Spot trading allows investors to buy and sell assets at the current market rate, known as the spot price, with the intention of taking immediate delivery of the underlying asset.
In summary, a spot market is a financial market where assets are traded for immediate delivery, providing an avenue for investors to engage in real-time trading of various financial instruments and commodities.
