What defines a spot transaction in FX?

What defines a spot transaction in FX?

• A. It is the rate quoted for immediate exchange with transaction date T+2
• B. It is the forward rate with settlement in the future
• C. It is settled on T+1
• D. It must go through a CLS settlement

Answer: (A)

Spot FX is the immediate exchange of two currencies at the current market rate, with settlement two business days after the trade date (T+2). The essential idea is agreeing on the spot rate now and settling the trade in two days. The description that combines an immediate exchange rate with settlement in two days matches this definition. Forwards involve locking in a rate for settlement at a future date, not two days. Settlement on T+1 isn’t the standard for major currencies, and CLS is just a settlement mechanism used by some trades, not what defines a spot transaction.

Spot FX is the immediate exchange of two currencies at the current market rate, with settlement two business days after the trade date (T+2). The essential idea is agreeing on the spot rate now and settling the trade in two days. The description that combines an immediate exchange rate with settlement in two days matches this definition. Forwards involve locking in a rate for settlement at a future date, not two days. Settlement on T+1 isn’t the standard for major currencies, and CLS is just a settlement mechanism used by some trades, not what defines a spot transaction.