Types of transaction in

foreign exchange market

and settlement date

Presented by:- Samadhan Tavase

MBA 2nd year
Div- A F-29
Under the guidance of :- Prof. Jyoti Howale Mam
 To learn and
understand about

OBJECTIVE

Types of Transaction
in Foreign Exchange
Market and
Settlement Date
What is foreign exchange market?

The foreign exchange market (Forex, FX,

or currency market) is a global decentralized or 
over-the-counter (OTC) market for the trading of 
currencies. This market determines 
foreign exchange rates for every currency. It includes
all aspects of buying, selling and exchanging
currencies at current or determined prices.
Types of foreign exchange transaction.

1.SPOT TRANSACTION
2.FORWARD TRANSACTION
3.FUTURE TRANSACTION
4.OPTION TRANSACTION
5.SWAP TRANSACTION
 SPOT TRANSACTION

A foreign exchange spot transaction, also known as FX

spot, is an agreement between two parties to buy one
currency against selling another currency at an agreed
price for settlement on the spot date.
 This trade represents a “direct exchange” between two
currencies, has the shortest time frame, involves cash rather
than a contract, and interest is not included in the agreed-upon
transaction. Spot trading is one of the most common types of
forex trading.
Another two types of spot transaction
 FORWARD TRANSACTION

 A forward contract is a customizeable derivative contract

between two parties to buy or sell an asset at a specified
price on a future date.
 Forward contracts can be tailored to a specific commodity,
amount and delivery date.
 Forward contracts do not trade on a centralized exchange
and are considered over-the-counter (OTC) instruments.
 FUTURE TRANSACTION
 Futures are financial contracts obligating the buyer to
purchase an asset or the seller to sell an asset and have a
predetermined future date and price.
 A futures contract allows an investor to speculate on the
direction of a security, commodity, or a financial instrument.
 Futures are used to hedge the price movement of the
underlying asset to help prevent losses from unfavorable price
changes
 OPTION TRANSACTION
 Options are financial derivatives that give buyers the right,
but not the obligation, to buy or sell an underlying asset at an
agreed-upon price and date.
 Call options and put options form the basis for a wide range
of option strategies designed for hedging, income, or
speculation.
 Although there are many opportunities to profit with options,
investors should carefully weigh the risks.
 SWAP TRANSACTION
 A foreign currency swap is an agreement to exchange currency between
two foreign parties, in which they swap principal and interest payments
on a loan made in one currency for a loan of equal value in another
currency.
 There are two main types of currency swaps.
1. The fixed-for-fixed currency swap involves exchanging fixed interest
payments in one currency for fixed interest payments in another.

2. In the fixed-for-floating swap, fixed interest payments in one currency

are exchanged for floating interest payments in another.
 What is settlement date?
 The settlement date is the date when a trade is final, and the buyer must make
payment to the seller while the seller delivers the assets to the buyer. 
 Settlement date according to types of transaction.
1. Spot transaction:- It is T+2
2. Forward transaction:- It depends on type of contract i.e. 1 month, 2month or
3 month
3. Future transaction:- It depends on type of contract but majorly it is 90 days
means 3 month.
4. Option transaction :- It also depends upon type of contract i.e. 1,2 or
3 months.
5. Swap transaction:- It depends upon the maturity of agreement or
contract i.e. Upto 3,5,10 or even more year
Thank you...