ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -It handles only spot transactions or current transactions in foreign exchange. ADVERTISEMENTS: Transactions are affected at prevailing rate of exchange at that point of time and delivery of foreign exchange is affected instantly.

Detailed explanation-2: -What Is a Spot Trade? A spot trade, also known as a spot transaction, refers to the purchase or sale of a foreign currency, financial instrument, or commodity for instant delivery on a specified spot date.

Detailed explanation-3: -Spot markets can exist wherever there is an infrastructure to carry out such a trade. An example of a spot market trade is when an investor (Mr. Jones) wants to buy 1, 000 IBM shares on the New York Stock Exchange (NYSE). He will contact his broker to buy the shares at the prevailing market price, say $117.60.

Detailed explanation-4: -The spot market is where financial instruments, such as commodities, currencies, and securities, are traded for immediate delivery. Delivery is the exchange of cash for the financial instrument.

Detailed explanation-5: -The spot market or cash market is a public financial market in which financial instruments or commodities are traded for immediate delivery. It contrasts with a futures market, in which delivery is due at a later date.