DEFINITION of 'Daily Cut-Off'

In the forex market, the daily cut-off is a specified point in time set by a forex dealer to stand as the end of the current trading day and the beginning of a new trading day. This is done for primarily administrative and logistical reasons, because although the forex market trades 24 hours a day, the market and its intermediaries require a specified beginning and end to each trading day in order to record trade dates and define settlement periods.

BREAKING DOWN 'Daily Cut-Off'

For example, let's say a forex dealer specified that the daily cut-off was 5pm every day, and a trader placed two forex trades on the evening of January 1 - one at 4:50pm and another at 5:10pm. Since the daily cut-off is 5pm, the first trade would be booked as taking place on January 1, while the second would be recorded as a January 2 trade, since it took place after the daily cut-off.

The daily cut-off date is important in that it sets the value date for the specific trade. Because spot trades are settled T+2, the trade date is required. For example, in the scenario above, the trade done at 4:50pm will have a settlement date of January 3, assuming January 2 and 3 are not weekends, and the trade done at 5:10pm, will settle the following business day. So, despite the trades being just 20 minutes apart and on the same day they will settle on separate days. 

Most currencies will have a daily cut-off of late afternoon eastern time. However, some emerging market currencies will cut-off earlier in the day, especially for those trades that are non deliverable. 

 

RELATED TERMS
  1. Cutoff Point

    The point at which an investor decides whether or not a particular ...
  2. Dual Rate Income Tax

    An income tax rate structure in which two different tax rates ...
  3. Book Closure

    Book closure is a time period during which a company will not ...
  4. Record Date

    The record date is the cut-off date, established by a company, ...
  5. Rolling Settlement

    A rolling settlement is the process of settling security trades ...
  6. Settlement Date

    A settlement date is defined as the date a trade is settled or ...
Related Articles
  1. Trading

    Forex or Stock Trading: Which Works For You?

    Even though the odds favor stock trading, forex trading has several advantages to offer a particular type of investor.
  2. Trading

    Forex Broker Guide

    A Guide To Choosing a Forex Broker
  3. Trading

    Can Forex Trading Make You Rich?

    Forex trading may be profitable for hedge funds or unusually skilled currency traders, but for average retail traders, forex trading can lead to huge losses.
  4. Trading

    Forex Trading: A Beginner's Guide

    Learn about the forex market and some trading strategies to get started.
  5. Trading

    How to Set a Forex Trading Schedule

    Just because the forex market trades 24 hours a day doesn't mean you have to, which is why you can set a trading schedule. Here's how.
  6. Investing

    Getting Started In Foreign Exchange Futures

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

    Economic Factors That Affect The Forex Market

    Knowing the factors and indicators to watch will help you keep pace in the competitive and fast-moving world of forex.
  8. Trading

    Best Time(s) of Day, Week & Month to Trade Stocks

    Is 9:00am or Noon better to buy stock? Best day? What about best month? Here's how time affects trading decisions based on daily, weekly and monthly trends
RELATED FAQS
  1. How does the foreign-exchange market trade 24 hours a day?

    Trading in the forex is not done at one central location, but is conducted by phone and electronic communication networks ... Read Answer >>
  2. Do I own a stock as of the trade date or the settlement date?

    When it comes to buying shares, there are two key dates involved in the transaction. The first date is the trade date, which ... Read Answer >>
Hot Definitions
  1. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  2. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
  3. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
  4. Monte Carlo Simulation

    Monte Carlo simulations are used to model the probability of different outcomes in a process that cannot easily be predicted ...
  5. Price Elasticity of Demand

    Price elasticity of demand is a measure of the change in the quantity demanded or purchased of a product in relation to its ...
  6. Sharpe Ratio

    The Sharpe ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk.
Trading Center