A spot transaction in the interbank market is the purchase of foreign exchange, with delivery and payment between banks to take place, normally, on the second following business day. The Canadian dollar settles with the U.S. dollar on the first following business day.
The date of settlement is referred to as the value date. On the value date, most dollar transactions in the world are settled through the computerized Clearing House Interbank Payment System (CHIPS) in New York, which provides for calculation of net balances owed by any one bank to another and for payment by 6:00 p.m. that same day in Federal Reserve Bank of New York funds.
Spot transaction is the predominant type of exchange rate transaction, involving the immediate exchange of bank deposits denominated in different currencies.