Spot and Forward Transactions. You will be obliged to meet the obligations arising under a foreign currency spot or forward Transaction and/or Contract in accordance with its terms. These Transactions and/or Contracts may be used to establish long or short positions in the Market. A ‘spot’ Contract is a cash market Transaction to buy or sell immediately a specified quantity of a certain Financial Instrument, for settlement in no more than two days. A ‘forward’ Contract is a Contract to buy or sell a specified quantity of a certain Financial Instrument at a specified date in the future at a specified price. Forward transactions are economically similar to exchange-traded futures Contracts. However, unlike exchange future Contracts, the price terms and characteristics of ‘spot’ or ‘forward’ Contracts are privately negotiated; accordingly, there is no centralized price source and the Transactions are not cleared through a clearinghouse. In general, the Over-The-Counter (OTC) Market is unregulated, there are no limitations on daily price movements (unless imposed by a government or central bank authority), no rules to regulate valuation or settlement procedures, and no minimum financial requirements for Market participants. At the defined settlement dates for ‘spot’ and ‘forward’ Contracts there will be a cash settlement (depending on the terms of the specified contract) which you may receive from or be obliged to pay to us. There will not be a physical delivery of currency unless prior arrangements are made with us. The size of the cash settlement payment is dependent on the position you have and the market movement in the time since the position was established.
