The place to trade currencies is the foreign exchange market, often referred to as the FX, forex or currency market. It is over-the-counter, decentralised and worldwide.
Businesses utilise the foreign exchange market to help with both international investments and international trade as it enables them to convert one currency to another. This allows businesses to import, for example, French goods and pay in Euros rather than Pound Sterling, even though the business’s income is Pound Sterling.
Foreign exchange spot trading, sometimes referred to as Spot FX trading, is buying one currency with a different currency for immediate delivery, rather than for future delivery. It enables you to buy “on the spot” with transactions typically taking 2 days but this can be done more quickly. Spot forex transactions have a far shorter delivery time. It is generally used when clients need to buy and sell currency and transfer it within the shortest period possible.
According to the Bank of International Settlements in April 2010 the average daily turnover of spot transactions was $1.490 trillion
So why is spot FX trading such big business?
With a wide variety of different factors affecting the value of different currencies worldwide simultaneously, the ability to buy or sell currencies as their exchange rates rise or fall – by even the smallest movements – can make a difference to your bottom line. Spot FX enables you to take advantage of movements in the currency markets instantly in order to suit your business requirements.
Flexible Spot Forex Trading
The key benefit of spot foreign exchange is the ability to react to fluctuations instantly and as such, many specialists have opened offices. These are experts in their field and will be able to give you advice on how best to trade. When looking at specialist you should ask the following:
- Do they have access to exchange rates in all major and emerging currency pairs
- How long will the settlement period be for which your agreed exchange rate will be held.
- How quickly they can settle a transaction
- Do they have a personal spot dealer and tailor made service.
- What are the settlement and monitoring processes
In addition, if you are making or receiving payments to the same suppliers on a frequent basis, enquire if mandates can be set up for future use to smooth and speed the settlement process even further.
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Article provided by corporate-fx.co.uk
