The spot market is where securities are sold for cash and delivered immediately, whereas forward markets (or derivative markets) the delivery date is different from the negotiation date.

Question

BlackTom AI · Accepted Answer

The question asks us to evaluate a statement about the spot market versus forward markets. 
Option 1: True. The core idea is that the spot market involves buying or selling securities for immediate delivery and cash exchange, typically settlement occurs quickly after the trade (often T+2 or T+1 depending on the market). In contrast, forward markets (derivatives) are contracts to buy or sell an asset at a specified price on a specified future date; the delivery and settlement occur in the future, not the negotiation date. This separation between contract date and delivery date is a defining feature of forwards and many other derivatives. 
Option 2: False. One common misconception is that all markets settle instantly or that forwards deliver on the same day as the contract is negotiated. In reality, forwards are designed precisely so that the delivery can occur at a later date, and many forward contracts allow for delivery or cash settlement at a predetermined future time. Some readers may also think that forwards are not delivery-based, but most forwards imply a future transaction with a fixed delivery date, while cash-settled derivatives still have a defined future settlement date. 
Option 3: If interpreted narrowly as “spot markets always settle immediately with delivery and payment,” that portion is generally accurate, which supports the statement in the question. However, the key contrast with forwards hinges on the separation of trade date and delivery date, which the statement emphasizes. 
Option 4: If someone argues that forwards cannot have delivery or that the delivery date is always the same as negotiation, this is inconsistent with standard derivative definitions. Forwards are frequently designed to settle at a future date, not the trade date, and that is exactly what the statement is conveying. 
Overall, the reasoning supports the claim that the spot market is for immediate delivery and cash exchange, while forward markets involve a future delivery date distinct from the negotiation date, making the statement true.

The spot market is where securities are sold for cash and delivered immediately, whereas forward markets (or derivative markets) the delivery date is different from the negotiation date.

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