Understanding the Dates

Spot Value Date

The date on which a transaction is contracted is known as the 'contract date' or 'trade date'. The dates on which the cash flows occur are known as 'value dates'.

In international transactions, two business days are usually allowed between the contract date and the value date. This allows time for payments to be made to accounts in banks and other countries which may be in different time zones. 'Spot value' refers to a payment which will be made two business days from the contract date. If there is a holiday in either or both countries in which the cash flows are to occur, the spot date moves forward to the next eligible date.

A 'spot transaction' is done for value two business days from the contract date. As this is the recognised standard form of quotation, any deviation from this requires an adjustment.

Forward Value Date

If the cash flows associated with a transaction are to occur on a date or dates further into the future than spot, these are said to have 'forward value'. It is common for transactions to mature some round number of months after spot. For example, if GBP 1 million is purchased for value three months from spot, the GBP will be received three months from the spot date. If that date is a weekend or public holiday, the repayment will occur on the next available business date unless that would require going beyond month-end in which case the forward value date would be the first available business day prior to month end.

Short Dates

On occasions it is necessary for transactions to mature and the cash flows to occur prior to spot value. By definition there are only two eligible business days before spot value: today (tod) and tomorrow (tom). These are known as 'short dates'. Transactions with cash flows which occur on the same day as the contract date are known as 'value today' transactions. Similarly, transactions with cash flows which occur on the business day following the contract date are described as 'value tomorrow'. Most foreign exchange transactions are done for spot value.