Business, Legal & Accounting Glossary
A spot market is a market where goods are paid for with cash and delivered immediately.
A commodities or securities market in which goods are sold for cash and delivered immediately is referred to as the spot market or cash market. Contracts that are bought and sold on these markets are immediately effective. Wherever the infrastructure exists to conduct the transaction spot markets can operate. For most securities, the spot market exists primarily on the Internet.
The spot market is also known as the Cash market and is a constituent of Public financial markets. Spot market denotes the market where commodities or financial instruments are exchanged with a view of immediate delivery. These markets are in contrast to Futures markets, where financial instruments or commodities are traded for delivery at some later stage. A spot market may be either an organized exchange or an Over-The-Counter exchange.
Spot markets work primarily over the internet. That said, these markets can carry out transactions wherever there is proper infrastructure in place. These financial instruments or commodities are bought and sold on the basis of the latest market price.
Under these markets, the parties to the contract carry out the transaction directly and are not bound by the regulations of any formal exchange. All the parties to the contract agree upon the terms, and these terms may differ from contract to contract. The parties may or may not publish the price as per their discretion.
The spot foreign exchange market generally levies two day delivery period restriction. This is done to facilitate the movement of funds from one financial institute to the other. A large proportion of such speculative foreign exchange trading in the retail segment is carried out through online trading platforms.
The spot energy market is designed to facilitate transactions between energy producers and energy buyers. These markets let energy producers with excess energy get in touch with buyers. The parties can discuss prices online and can make delivery in a matter of a couple of minutes.
Spot markets are generally dominated by speculators as these markets convey the latest transaction prices immediately. These markets may be government-controlled or may be regulated by an industry association. Alternatively, these spot markets can be under private control as well. Major instances of energy spot markets are National Balancing Point in the United Kingdom and Title Transfer Facility in the Netherlands.
Either the spot markets can be privately operated or they are controlled by industry organizations or government agencies. The speculators are frequently attracted by them since the public knows the spot market prices almost as soon as deals are transacted.
For natural gas in Europe, the examples of energy spot markets are the Title Transfer Facility (TTF) in the Netherlands and the National Balancing Point (NBP) in the United Kingdom.
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This glossary post was last updated: 28th November, 2021 | 0 Views.