How Spot/Next and Tom/Next FX Swaps Roll Settlement

Summary

The note distinguishes two short-dated foreign-exchange swap tenors used to move settlement forward. Under the usual T+2 spot convention, a tomorrow/next swap exchanges currencies on the next business day and reverses that exchange on the following business day. A spot/next swap begins on the spot value date, then reverses on the next business day, so its first leg occurs one business day later than the first leg of a tomorrow/next swap.

The explanation also contrasts both swaps with an outright spot trade, which has a single exchange on the spot date, and mentions overnight swaps as running from today to the next business day. The example assumes no holidays and uses a particular settlement convention; actual value dates depend on the currency pair’s business-day calendar. The note describes timing and settlement mechanics, but does not discuss pricing, swap points, or the costs of repeatedly rolling a position.

Key ideas

• A tomorrow/next swap exchanges currencies on the next business day and reverses on the following business day.
• A spot/next swap starts on the spot value date and reverses on the next business day.
• Under T+2 settlement, the first leg of spot/next occurs one business day later than the first leg of tomorrow/next.
• Holiday calendars can alter the example’s value dates.

Tags

# Spot/Next and Tom/Next FX forward swaps


# Spot/Next and Tom/Next FX forward swaps












could somebody please tell me what is the main difference between Spot/Next and Tom/Next FX forward swaps? I know that both are used to roll spot FX position settlement to 1 day forward but I really appreciate some more information of the functions behind each of the swaps.

Thanks.

## Answer by Magic is in the chain (score 8, accepted)

https://quant.stackexchange.com/a/42117

Let’s say the settlement period is T+2, and you made a deal on the 8/10/2018. The spot date would be 10/10/2018 (assuming no holidays!), that’s when the physical exchange would happen. Now if you don’t want physical delivery, then tomorrow (9/10/18) you can use T/N (tommorow/next) swap to delay the physical delivery by one day, T/N is essentially swap between tomorrow and the next business day. You can keep rolling your position with T/N swap.

S/N (spot next) is the period from spot date to the next business day, so the delivery in the above example would be a day later (11/10/18) if you use S/N. O/N (overnight) is the period from today to next business day(tomorrow).

So in summary using T+2 conventions:

Spot: one exchange (only one leg) on T+2.

T/N: first leg of the swap on next business day, and the second leg on the following business day.

S/N: first leg of the swap on T+2, and the second leg on the following businesss day.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.