What is the Spot Market? – Master of Accounting Degrees

What is the spot market? Is it related to the stock market, or is it something else entirely? Read on as we highlight the ins and outs of this niche form of financial trade markets.

Spot Markets Defined

As much as one might be inclined to assume their relation to stock markets, spot markets are actually something completely different. While different, they are similar in a few ways. Like a traditional stock market, spot markets are trading markets where commodities and assets are traded, bought, and sold. The tides of these markets are likewise affected by supply and demand as well as countless other factors. This is similar to the typical trading markets such as the DOW Jones and the S&P 500.

The major difference that sets the spot market apart from the traditional trading market is its foundations in current trade conditions. Other markets trade and evaluate values based on future speculation and even process today’s transactions several days later. Spot markets are based on the premise of instantaneous, non-delayed exchanges as well as current market conditions. No consideration is given to future speculations or forecasts, no matter how expertly-backed they may be.

FOREX

FOREX is widely regarded as the world’s largest and busiest of spot markets. It is an open exchange market that allows trading among its many members throughout the world. The benefits of such a trading platform are many, including the ability to trade in different currencies. For example, a company in the United States may trade in the commodities or currency of foreign nations. Riding market trends and wise trades, great profits can then be had by anyone trading on FOREX. Business Insider provides a great rundown of the FOREX concept within its article, “INFOGRAPHIC: FOREX Explained.”

National Balancing Point

One of the most popular spot markets strictly dealing in energy trade is the NBP, or National Balancing Point. This trade market specializes in providing a platform for the instantaneous trade and valuation of UK natural gas. Here, traders can trade and seek market values in real-time with regard to this specific energy market of the United Kingdom. Again, the instant trading and valuations provided by the NBP distinctly separate it from future market dealers, placing it firmly in the category of spot markets.

American Metals Exchanges

Yet another glimpse of real-life spot markets is ours courtesy of the many trade markets dealing in American metals. Industrial metals such as steel and iron can be traded via various trade platforms alongside precious metals such as gold and silver. Here, today’s current valuations are king, and future forecasts mean nothing.. There are many exchanges dealing in the areas of American metal supplies, each with varying approaches and actively participating traders.

The spot markets of today allow traders to deal in virtually any kind of commodity, resource, or currency, despite international boundaries. This is also without regard to future speculation and slow-moving trading processes like those of the traditional trading markets. For instant, up-to-the-minute trading action, the spot market is always the way to go.