Spot Next

What Is Spot Next?

Spot next (S/N) is a term used in foreign currency trading. It denotes the delivery of purchased currency on a day after the spot date. Spot-next contracts are short-term swaps where a currency is rolled out one further day, the next day after the spot. 

Spot-next is otherwise known as "next business day."

Understanding Spot Next

When it comes to foreign exchange trading, also known as forex trading, timing is everything. As the whole premise of foreign currency trading is based on capitalizing gains from differences in exchange rates, and these rates are constantly shifting, forex offers an exciting place for certain investors. Due to the worldwide reach of finance, trade, and commerce, forex markets are often considered one of the largest and most liquid asset markets in the world.

During a spot trade, the spot date references the day that the funds of the foreign currency or instrument transaction are transferred. Based on the horizon, which refers to the date the transaction began, the spot date usually hovers around two business days. As it follows, spot next is usually the day after the spot date.

Example of Spot Next

The price for spot-next deliveries is adjusted for the extra time period. For example, a currency that is bought on Tuesday will have a spot date of Thursday and if it is rolled spot-next it will settle on Friday. The rate will be adjusted depending on the interest rates of the two prevailing currencies. However, as it is just one day after the spot, the rate of change will be minimal. 

For some currency pairs such as the U.S. dollar / Canadian dollar cross (USD/CAD), spot-next will settle two days after the trade date because the spot date is T+1, not T+2. Therefore, a trade in this currency pair that is executed on Tuesday, will have a spot-next settlement date of Thursday.