What is a Value Spot?

The value spot is the common designation for the time frame that is usually employed to describe the period between the creation of a contract and the actual remittance of payment that completes the terms of the contract. Often used with spot trades, value spots allow the seller to arrange payment in the form required by the seller, and to deliver the payment within the agreed upon amount of time. The typical value spot is two calendar days from the date that the transaction begins.

The value spot is considered to be the standard time frame for the successful completion of transactions that involve a spot trade. Many financial institutions refer to a value spot as a T+2 transaction. This is essentially understood to be the date of trade plus two additional days for completion.

Working with a value spot is often the preferred method of trading for investors and sellers who deal with spot trades. The two day time frame provides enough time to allow for the preparation of all necessary documents to allow for the legal transfer of the assets involved with the trade. A value spot also creates a pocket of time for the buyer and the seller to work out any details involving where the documents should be delivered once the transaction is complete. At one time, the two day turnaround was considered to be the most efficient mode of completing a transaction. However, as the electronic transmission of documents and the verification of pertinent details has become easier to accomplish, more spot trades are being conducted in less time.

While the value spot continues to be the most common application for the remittance of payment, there are other and more faster processes available today. Some transactions are conducted with the understanding of what is referred to as a value tomorrow process. The value tomorrow simply means that if the transaction takes place before the market closes today, payment in full will be rendered before the close of market on the following business day. In like manner, a T+0 transaction refers to a transaction that is begun today and is paid in full before the market closes for the day.