What is the definition of spot trading in the context of FGX?

Spot trading refers to the immediate exchange of currencies at current market prices. In this context, it is characterized by transactions where the buyer and seller agree on the current price to facilitate an immediate transfer of assets, typically settled "on the spot." This means that the actual delivery of the traded currencies usually occurs within a short period, often two business days after the trade date, which is standard in forex markets.

The significance of spot trading lies in its nature of providing liquidity and allowing participants to react quickly to market movements. Traders engage in spot trading to take advantage of immediate fluctuations in currency values, making it essential for managing financial risks or fulfilling immediate funding needs.

The other options reflect concepts that do not align with the instantaneous nature of spot trading. For instance, trading based on future prices refers to derivatives or forward contracts, while a delayed exchange does not capture the essence of the immediate transaction that spot trading entails. Additionally, the notion of trading only between two parties overlooks the broader market participation typical in spot trading activities.