Kinds of the Forex: Forward Market

Forward Market. On the forward Forex are used two tools: forward outright deals and exchange
deals or swaps. A swap deal is a combination of a spot deal and a forward outright deal. In
the forward market there is no norm with regard to the settlement dates, which range from 3 days to 3
years. Volume in currency swaps longer than one year tends to be light but, technically, there is no impediment to making these deals. Any date past the spot date and within the above range may be a
forward settlement, provided that it is a valid business day for both currencies. The forward markets are
decentralized markets, with players around the world entering into a variety of deals either on a one-onone
basis or through brokers.
The forward price consists of two significant parts: the spot exchange rate and the forward spread.
The spot rate is the main building block. The forward spread is also known as the forward points or the
forward pips. The forward spread is necessary for adjusting the spot rate for specific settlement dates
different from the spot date. It holds, then, that the maturity date is another determining factor of the
forward price.