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Why Are Forward Contracts Bespoke Rather Than Standardized? OTC FX forwards are described as bespoke because the counterparties can negotiate the notional, maturity, settlement form and other contract terms to fit a specific future currency exposure. Standardised currency futures instead
What Contract Structure Makes Forward Forex Different From Spot Forex? An outright FX forward and deliverable institutional spot FX are both binding bilateral agreements to exchange currencies at an agreed rate. Their primary structural boundary is the contractual value date:
How Do PvP and CLS Reduce Settlement Risk in Modern Spot Markets? Payment versus payment reduces spot FX principal settlement risk by making the final transfer of one currency conditional on the final transfer of the other. CLSSettlement applies that
What Is Herstatt Risk in Decentralized Spot Settlement? Herstatt risk is the classic form of FX principal settlement risk. It arises when the payment of the currency sold can no longer be cancelled with certainty while final receipt of the
Why Are TOD Contracts Far More Restrictive and Rare Than Standard Spot Deals? A TOD, value-today, or T+0 FX trade is intended to settle on the same valid business day on which the exchange rate is agreed. The word “contract”
What Settlement Risk Historically Defined Institutional Spot Forex? The settlement danger most closely associated with historical deliverable institutional spot forex was principal settlement risk, also known as Herstatt risk. It arises when one currency payment becomes irrevocable or final but