Value Dates: Cash, Tom, Spot and Forward
The deal date fixes the rate; the value date is when money moves. Spot is two working days out.
The value date is the day on which the two currencies in a forex deal actually change hands. The deal date is when the rate is agreed; the value date is when the money moves. Every rate question in Module 1 assumes you know which value date the rate is for.
FEDAI Rule 5.2 defines four settlement types. The gap between deal date and value date is what separates them, and anything beyond spot is a forward.
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The Four Value Dates
Cash
Also called
Ready, value today
Settles on
The deal date itself
FEDAI wording
"Ready" or "Cash" merchant contract is deliverable on the same day
Tom
Also called
Value next day
Settles on
The next working business day
FEDAI wording
Deliverable on the working business day immediately succeeding the contract date
Spot
Also called
Value spot
Settles on
The second working business day
FEDAI wording
Deliverable on the second succeeding working business day following the contract date
Forward
Also called
Value forward
Settles on
Any date beyond spot
FEDAI wording
Deliverable at a future date, beyond spot date; duration computed from the spot value date
| Type | Also called | Settles on | FEDAI wording |
|---|---|---|---|
| Cash | Ready, value today | The deal date itself | "Ready" or "Cash" merchant contract is deliverable on the same day |
| Tom | Value next day | The next working business day | Deliverable on the working business day immediately succeeding the contract date |
| Spot | Value spot | The second working business day | Deliverable on the second succeeding working business day following the contract date |
| Forward | Value forward | Any date beyond spot | Deliverable at a future date, beyond spot date; duration computed from the spot value date |
Why Spot Is Two Days
Spot settlement on the second working day is the international market standard. The two days give both banks time to confirm the deal and send payment instructions to their correspondents in two different countries. Cash and tom are shorter than standard, so they are priced off spot: the rate is adjusted for the days brought forward.
Forwards are measured from the spot date, not the deal date. A one-month forward dealt on Monday runs one month from Wednesday's spot date. RBI's Master Direction mirrors this: a foreign exchange derivative contract is one that settles on any date later than the spot settlement date.
Rules That Move a Value Date
- Saturday
- Not a working business day for forex (Rule 1.3), except for transactions with individuals, joint accounts and proprietary firms, which banks may do on Saturdays, Sundays and holidays under their own policy.
- Known holiday
- A holiday known at least 3 working business days before the date. If a contract's fixed delivery date or last option date falls on one, delivery moves back to the preceding working day (Rule 5.2).
- Suddenly declared holiday
- Any holiday that is not a known holiday. The contract becomes deliverable on the next working business day instead.
- Month-end maturity
- If an interbank contract maturing at month-end hits a known holiday, settlement is preponed to the preceding working day; in other holiday cases it is postponed to the next working day (Rule 8.09).
- Spot date rollover
- For FCY/INR transactions the spot date rolls over at 12.00 midnight IST (Rule 1.2), relevant now that banks deal beyond the 9.00 a.m. to 5.00 p.m. market hours.
Spot, tom and holiday questions. No signup.
Holidays in Two Countries
A value date must be a working day for both currencies, because each leg settles in its own country. By market convention, if the spot date is a holiday in either centre, value moves to the next day that is a working day in both. In India, a Mumbai holiday stops FCY/INR settlement even when New York is open.
How CCFE Tests This
- check_circleDefinition recall, worded to look alike: "second succeeding working business day" is spot; "working business day immediately succeeding" is tom. The trap option offers spot as the next day.
- check_circleDate counting: a deal on a Thursday is spot on the following Monday, because Saturday is not a forex working day.
- check_circleHoliday logic: known holiday means prepone, suddenly declared holiday means postpone. Candidates reverse these.
- check_circleForward duration: counted from spot value date, not from the contract date.
FAQs
What is the spot date in forex?expand_more
The second working business day after the deal date. Under FEDAI Rule 5.2 a spot contract is deliverable on the second succeeding working business day following the contract date.
What is the difference between cash, tom and spot?expand_more
Settlement timing. Cash settles the same day, tom the next working day, spot the second working day. Anything later is a forward.
Is Saturday a working day for forex settlement in India?expand_more
No, except that banks may deal with individuals, joint accounts and proprietary firms on Saturdays, Sundays and holidays under their internal policy (FEDAI Rule 1.3 read with 1.2).
What happens if the delivery date of a forex contract becomes a holiday?expand_more
If it is a known holiday, delivery moves to the preceding working day. If the holiday is suddenly declared, delivery moves to the next working day.
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