IOE Tradeportal

Spot Rates

Spot FX Contract

In the case of a Spot FX Contract, the delivery date is usually two business days ahead of the date on which the contract was agreed.

In some currencies and circumstances it may be possible to negotiate a Value Date only one business day ahead ('next-day value'). Exceptionally FX deals can be negotiated for settlement on a same-day basis where there is time. However, the transaction costs would be higher because the market is usually thinner (less volume) and more expensive because the bank's bid-offer spreads are usually wider.

Spot FX Rates

Spot FX Rates are set by currency dealers responding to the forces of supply and demand in the Spot foreign exchange market for each currency.

Spot FX rates are quoted by banks in pairs, e.g:

New York: US$1.8733 - 1.8833
Tokyo: YEN197.98 - 199.00
Brussels: EUR1.4624 - 1.4725

These figures represent the number of units of each currency that will be exchanged for one pound sterling.

The LOWER RATE for each currency is the bank's selling rate for sterling

The HIGHER RATE for each currency is the bank's buying rate for sterling

The difference between the selling rate and the buying rate represents the bank's Spread or Margin for profit/overheads. In a competitive situation between banks (high value transactions), this will vary according to amount traded, volume and market demand.

A company who wishes to sell the US dollar proceeds from an export sale to their bank at the Spot Rate would receive £1 for every US$1.4255 bought by the bank.

An importer who wishes to purchase Euros from the bank at the Spot Rate would receive EUR1.6321 for every £1 exchanged by the bank.