Cash Market

What is a 'Cash Market'

A cash market is the marketplace for immediate settlement of transactions involving commodities and securities. In a cash market, the exchange of goods and money between the seller and the buyer takes place in the present, as opposed to the futures market where such an exchange takes place on a specified future date.

Also known as the spot market, since such transactions are settled "on the spot."

BREAKING DOWN 'Cash Market'

Cash market transactions can take place either on a regulated exchange or over-the-counter (OTC). In contrast, transactions involving futures are conducted exclusively on exchanges, while forward transactions, such as currency forwards, are generally executed on the OTC market.

For a specific commodity, the price in the cash market is usually less than its price in the futures market. This is because there are carrying costs, such as storage and insurance, involved in holding a commodity until it can be delivered at some point in the future.

RELATED TERMS
  1. Cash Transaction

    A transaction that is settled with cash on the same day as the ...
  2. Cash Price

    The actual amount of money that is exchanged when commodities ...
  3. Settlement Date

    1. The date by which an executed security trade must be settled. ...
  4. Spot Price

    The current price at which a particular security can be bought ...
  5. T+1 (T+2,T+3)

    Abbreviations that refer to the settlement date of security transactions. ...
  6. Foreign Exchange

    The exchange of one currency for another, or the conversion of ...
Related Articles
  1. Investing

    Understanding the Spot Market

    A spot market is a market where a commodity or security is bought or sold and then delivered immediately.
  2. ETFs & Mutual Funds

    Introduction To Currency Futures

    The forex market is not the only way for investors and traders to participate in foreign exchange.
  3. Trading

    Futures Fundamentals: Introduction

    A futures contract is a type of derivative instrument, or financial contract, in which two parties agree to transact a set of financial instruments or physical commodities for future delivery ...
  4. Trading

    Futures Traders

    Futures are financial contracts giving the buyer an obligation to purchase an asset (and the seller an obligation to sell an asset) at a set price at a future point in time. Futures are also ...
  5. Trading

    The Difference Between Forwards and Futures

    Both forward and futures contracts allow investors to buy or sell an asset at a specific time and price.
  6. Markets

    What Does Contango Mean?

    Contango‚Äč is when the futures price of a commodity is higher than the expected future spot price.
  7. Trading

    Getting Started In Foreign Exchange Futures

    Learn how these futures are used for hedging and speculating, and how they are different from traditional futures.
  8. Markets

    Understanding the Commodity Market

    There are currently 50 physical and virtual commodity markets worldwide where almost 100 primary commodities trade through the exchange of ownership rights.
  9. ETFs & Mutual Funds

    What is a Settlement Date?

    A settlement date is the day a security trade must be settled.
  10. Trading

    Forex: Gauging Forex Market Sentiment With Open Interest

    Examining open interest on currency futures can help you confirm the strength of a trend in forex market sentiment.
RELATED FAQS
  1. How are commodity spot prices different than futures prices?

    Find out more about commodity spot and futures prices, how to calculate a commodity's futures price, and the differences ... Read Answer >>
  2. Who sets the price of commodities?

    Commodities are extremely important as they are essential factors in the production of other goods. A wide of array of commodities ... Read Answer >>
  3. What is the difference between a forward rate and a spot rate?

    Learn about spot and forward contracts, how spot and forward rates are used for spot and forward contracts, and the difference ... Read Answer >>
  4. What is the history of futures?

    Explore the history of futures trading and the origin of the major commodity futures trading exchanges in England and the ... Read Answer >>
  5. Are there any pure arm's-length markets?

    Learn about arm's length markets and transactions. Explore situations when different market participants may not be at arm's ... Read Answer >>
  6. How can I trade in foreign futures?

    Discover how an American investor can get started in trading foreign futures, including which regulations and restrictions ... Read Answer >>
Hot Definitions
  1. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  2. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  3. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  4. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  5. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  6. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
Trading Center