Spot Market Definition

In the simplest terms, a spot market is where physical commodities or currencies are bought and sold for immediate delivery. The price is determined by the supply and demand of each particular commodity or currency. For example, if there is more demand for a commodity than there is available supply, the price of the commodity will increase.

A spot market can be used to trade both physical commodities, like oil or gold, as well as financial instruments, like foreign currency exchange rates. The spot market for foreign currencies is often called the ‘interbank market’ because it is where banks trade with each other.