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Spot value is the time between contract creation and payment completion. It’s typically two days and known as T+2. It allows for paperwork preparation and asset transfer. Faster payment processes like Tomorrow’s Value and T+0 are also available.
Spot value is the common designation for the time interval that is usually used to describe the period between the creation of a contract and the actual remittance of the payment completing the terms of the contract. Often used with spot exchanges, value points allow the seller to arrange payment in the form requested by the seller and to deliver payment within the agreed time frame. The typical spot value is two calendar days from the start date of the transaction.
Spot value is considered the standard time frame for the successful completion of transactions involving a spot exchange. Many financial institutions refer to a spot value as a T+2 deal. This is essentially understood as the date of the operation plus two additional days for completion.
Working with a spot value is often the preferred trading method for investors and sellers dealing with spot trades. The two day time frame provides sufficient time to allow for the preparation of all necessary paperwork to enable the legal transfer of the assets involved in the trade. A spot value also creates a pocket of time for the buyer and seller to work out all the details regarding where the documents need to be delivered once the transaction is complete. At one time, a two-day turnaround was considered the most efficient way to complete a transaction. However, as the electronic transmission of documents and verification of pertinent details has become easier to accomplish, more spot operations are conducted in less time.
While value spot continues to be the most common application for payment remittance, other faster processes are available today. Some transactions are conducted with an understanding of what is called a tomorrow’s value process. Tomorrow’s Value simply means that if the transaction occurs before market closes today, full payment will be made before market closes the following business day. Similarly, a T+0 transaction refers to a transaction that started today and is paid in full before the market closes for the day.
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