Spot market

OTC

In the OTC i.e., over the counter market, trades are based on contracts made directly between two parties, and not subject to the rules of an exchange. The contract terms are agreed between the parties and may be non-standard. The price will probably not be published.

Examples

Energy spot

The spot energy market allows producers of surplus energy to instantly locate available buyers for this energy, negotiate prices within milliseconds, and deliver energy in a short-term timeframe. Spot markets can be either privately operated or controlled by industry organizations or government agencies. They frequently attract speculators, since spot market prices are known to the public almost as soon as deals are transacted. Examples of energy spot markets for natural gas in Europe are the Title Transfer Facility (TTF) in the Netherlands and the National Balancing Point (NBP) in the United Kingdom.

Settlement and delivery

Although spot markets are associated with immediate delivery, the settlement period depends on the asset class and market convention. In securities markets, settlement is the process in which the buyer pays for the security and the seller delivers it. In the United States, most securities transactions settle on the next business day after the trade date under the T+1 settlement cycle.

In commodity markets, the cash market is distinguished from the futures market because it involves the market for the actual cash commodity rather than a futures contract. The Commodity Futures Trading Commission describes a cash market as a market for the cash commodity, which may take the form of an organized central market, an over-the-counter market, or a local market for a particular region.