There are types of spot market today. It is where financial instruments like securities, currencies, and commodities are traded. The trading in the market is for immediate delivery. 

Delivery refers to the cash exchange for financial instruments. On the other hand, a futures contract based on the future delivery of the underlying asset.

OTC (Over the Counter)

In this one of the types of spot market, sellers and buyers meet and trade bilaterally. They trade through consensus. There is no central exchange institution or third-party supervisor to regulate the trade of a transaction.

It is different from the organized exchanges. There is no standard of assets being traded in terms of price, quantity, or other terms. Therefore, sellers and buyers negotiate on the spot and trade. 

Trading in this market is mostly private and there may be no publication of prices. The most widely known and active OTC market is the currency exchange market.

Market Exchanges

In organized market exchanges, sellers and buyers meet to offer available financial commodities and instruments, they meet to bid. Trades can take place through trading floors or electronic trading platforms.

Trading is more efficient on electronic trading platforms. Prices are instantly determined since there are a large number of trades across multiple exchanges. Exchanges handle several financial commodities and instruments, or they also can deal in a niche in certain types of assets.

Traders in this one of the types of spot market are usually settled through an exchange broker who acts as a market maker. Exchange-traded assets are standardized, according to exchange standards.

For assets being traded, there may be a minimum contract price or in specific values and quantities. The price offered to buy (buyers’ bids) and the price offered to sell (sellers’ offers) determine the prices.

Prices in the spot market can even change in milliseconds. All trades and procedures all standardized while exchanges are regulated.

The NYSE (New York Stock Exchange is the example in which the stock is mainly traded. Another is the Chicago Mercantile Exchange Group with the most traded assets are commodities and offer future and option trading.

Examples of Futures and Spot Market

The two markets are different. Delivery occurs immediately in the spot market. For instance, if you want to buy XYZ’s shares, you must go to the cash market so that you can buy the shares.

In contrast, an agreement made to sell or buy the commodity for a determined price on a particular date is called a futures contract. For example, you make a contract to purchase shares at the market price at a certain future.

What is the Future’s Impact on Spot Prices?

The spot prices are quoted for the direct purchase of particular shares or commodities. A trade that will occur at a future date is what is called the future price. A current spot price of a commodity with the carry cost for a while before delivery determines the commodity future price.

In the future market, speculation is when one party thinks that the price will fall and the other party believes that the price will rise. Only based on this speculation, they put their money.

In conclusion, demand and supply mostly affect the spot market.  In contrast, the futures market is affected by weather predictions, storage costs, and others. Apart from this, to be a successful trader, you need to choose the right partner. 

A regulated broker like Didimax forex broker can help you to start your trading. There are various trading instruments you can choose from. Stay informed and insightful by understanding types of spot market and other important things in forex trading.