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Examples of energy Spot Markets for natural gas in Europe are the Title Transfer Facility in the Netherlands and the National Balancing Point in the United Kingdom. A spot market is where spot commodities or other assets like currencies are traded for immediate delivery for cash.
- As with exchanges, OTC stock transactions are typically spot trades, while futures or forwardtransactions are often not spot.
- Ordinarily, a spot price, futures or forward price can be quoted for an asset.
- However, increasing demand after economic recovery in Norway may also be part of the explanation.
- When a trader buys or sells currencies on the forex market, they are paying or receiving spot market prices.
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- As mentioned earlier, spot trades are subject to instantaneous settlement.
- However, most of these contracts rely on the pricing reported in the spot market as the basis for their pricing.
Transactions that exceed this period are assigned to the futures market. Spot markets are also referred to as “physical markets” or “cash markets” because trades are swapped for the asset effectively immediately.
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Perhaps the most popular spot market example is the New York Stock Exchange. Billions worth of stocks are traded on a daily basis, and settlement takes place two dates after the trade date. Wherever there is an infrastructure where the transaction can be conducted, spot markets will operate. The spot market contrasts with the futures market, where delivery occurs at a later date. The price quoted for a purchase or sale on the spot market is called the spot price.
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