DefinitionThe Spot Market is commodities or a securities market, in which goods are sold for cash, and are effective immediately. These transactions are recorded right away, or within the second business day. These goods can be perishable or non-perishable.   Spot QuotationsWhen looking at the daily newspaper and acknowledging the major currencies, you may see up to four different foreign exchange quotes. As we learned in class, the major four quotes are the spot price, 30-day, 90-day and 180-day. These quotes are merely meant for dealers whom trade amongst the interbank market. The majority of these trades involve the U.S dollar, therefore are expressed in either American or European terms. Further the most common participants in the spot market are: commercial banks, brokers, customers of commercial banks and central banks.  It is common for banks to use a direct quotation system when quoting nonbank customers. By doing this, a quote is given to the home currency a price of a foreign currency. However, this is not always the case. At times countries will see the exact opposite, giving the foreign currency price of the home currency. When this is the case, the method indirect quotation is implemented.   Typically banks do not charge a commission during currency transactions, but instead make a profit from the spread between the buying and selling rates. A bid-ask spread is used to calculate the fee charged by the broker. As discussed in class, the first rate is the buy and the following rate is the bid. Obviously, when selling you want to sell at a higher price, but when buying, buy at a discounted rate. When you sell at a higher rate than buying, a profit is made.  Transaction CostAs learned, risk is what creates wealth. The spread compensates for the risk traders bear. Currencies with a greater volatility have a higher spread. The percentage spread is typically expressed in a percentage cost of what the foreign exchange market carries out.   Cross RatesMost commonly, currencies are quoted against the dollar, however when there is an exchange rate between 2 -non US$ currencies, a cross rate is used.