‘Spot market’ is a financial market where financial assets, securities or commodities are bought and sold in cash with immediate delivery. It is also known as ‘cash market’ or ‘physical market’.
Spot market can be either an organized market or OTC (over the counter) or an exchange. In the spot market, contracts got effective immediately as soon they are traded while commodities can be delivered in one month or less. Unlike the derivatives market like futures, where payment is scheduled for a later time, spot market is characterized by either on the spot cash payment or within a short period of time.
In the future market value depends upon various attributes such as future prices, expected demand, global terrorism, wars, civil movements and any such worldwide phenomena but in the spot market the value of a commodity or security is decided by demand and supply only. The foreign exchange (FOREX) market is one of the world’s largest spot market.
