Depending on whether a trade leads to direct ownership of actual securities instruments or currency on the one hand, or to a financial contract that derives its value from the value of an underlying asset on the other, enables us to distinguish between the cash and derivatives markets.

The cash market can be interpreted as a here and now of trading. Picture it as the bustling heart of commerce where transactions are as immediate as the exchange of goods at a farmer's market. However, the merchandise here are securities, currencies, and commodities. Not in promises or potential, but in actual tangible assets that can be touched, held, or accounted for instantly.

The essence of the cash market is its immediacy. Echoing the principles of a hand-to-hand exchange transactions are settled immediately or on the spot, which in the case of many financial instruments means actually two business days after the transaction date, which we refer to as t plus two.

T is the transaction day plus two business days for the trade to settle. The actual settlement date is then referred to as the spot date. The primary aim of the spot market is to facilitate the seamless flow of actual assets, ensuring that ownership passes swiftly. Now let's have a look at the derivatives markets in which products like futures, options and swaps are traded.

Derivatives markets serve those who look beyond the horizon, hedging positions against what tomorrow might bring or speculating on the shifting of market trends. These traded instruments allow market participants to engage with assets indirectly and therefore to benefit from price movements in the underlying assets without owning the asset directly. Settlements within this market a adheres to a different timeline than the cash market often concluded at an agreed future date later than.