FX spot date and settlement
Table of Contents
Summary
In FX, "spot rate" almost always means a forward rate — not the instantaneous
rate "now", but the rate for the earliest date funds can actually settle, the
spot date. Spot days (settlement days) are the business days needed to
deliver cash for a currency (USD = 1, most others 2). A pair's spot date is
today plus the pair's spot days, where the pair's spot days are the maximum of
the two currencies' spot days — so most pairs settle T+2. This T+2 /
max-of-two rule is load-bearing for the cross-rates matrix.
Detail
- Spot days / settlement days: business days to deliver cash for a currency.
USD = 1; most currencies2. - Spot date of a pair = today + spot days of the pair, where the pair's spot
days =
max(spot_days(ccy1), spot_days(ccy2)). Most pairs are thereforeT+2. - Why it matters: when a derived rate is triangulated through an intermediate currency, the legs of the triangle can have different spot dates. Reconciling them requires interest rates and an interpolation method (see spot rate derivation mechanics), and spot-day mismatches along a derivation path are the root of subtle risk artefacts (see CRM risk).
Business day vs settlement day
These two terms are often conflated:
- Business day: a day that is not a holiday in either currency of the
pair. Used for tenor calculations (e.g.
1Wfrom spot = spot + 5 business days in both currencies). - Settlement day: a business day that is also not a holiday in the settlement currency (typically USD for most pairs). Settlement days are a subset of business days.
The distinction bites when a pair's business-day calendar and the USD
holiday calendar disagree — a day can be a valid business day for
EUR/GBP but not a valid settlement day if it falls on a US federal
holiday.
Holiday calendars
- A pair's business-day calendar is the union of its two currencies' holiday calendars — a day is a business day only if it is a holiday in neither.
- The pair's fixing-date calendar must be consistent with the holiday calendar of the fixing source.
- The pair's settlement-date calendar must be consistent with the holiday calendar of the settlement currency.
- For NDFs and cash-settled options, the fixing date and settlement date can have different calendar requirements; both must be validated at trade creation (see Deliverability and non-deliverable instruments).
See also
- Cross-rates matrix (CRM) — the structure that depends on this convention.
- Term Structures and Tenors — settlement conventions, tenors, date rolling.
- Time and timestamps — the system-wide date/time conventions.
- Currency pairs — the pair-as-entity companion hub.
- Deliverability and non-deliverable instruments — NDF fixing-date calendar constraints.