Value Date Vs. Trade Date on FOREX Statements
Trade entries that appear on Forex statements are always dated twice. The first date is called the trade date, and the second date is called the value date. These dates indicate the date at which a trader executes the foreign exchange trade and the date at which the trader receives the funds generated by the trade. Since trade date and value date affect the receipt of money from a foreign exchange trade, they are an important consideration for speculators and bankers.
Other People Are Reading
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Forex
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Forex is another name for "foreign exchange" and refers to the international foreign exchange market. In this market, participants buy and sell the money issued by the countries of the world. In this market, money is priced using exchange rates, which are ratios expressing the relative value of one currency against another. Exchange rates experience fluctuations in this market commensurate with changes in currency values driven by supply and demand. As a result, market participants trade foreign currency for speculative as well as practical reasons due to the opportunities for profit.
Forex Trading
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In a Forex trade, a trader places a buy or sell order for a specific currency. In a currency buy, a trader indicates that he wishes to purchase a definite amount of a specific currency in exchange for a currency he already holds. In this case, the currency he holds is the offset currency. Conversely, in a currency sell, a trader indicates that she wishes to sell an amount of currency in exchange for the parallel value of another. In this case, the offset currency is the currency the trader receives in return.
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Forex Statements
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Forex trades are facilitated by a broker-dealer intermediary, such as a bank or registered internet-based trading broker. A broker-dealer provides the trader with a statement or receipt that contains the details of trades placed. These details include whether the trade was a buy or a sell, the currencies and amounts traded, the exchange rate, and the applicable trade and value dates.
Trade Date and Value Date
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The trade date associated with a trade recorded on a Forex statement simply notes when the trade occurred. The value date recorded beside a trade indicates the date on which a trader can expect that trade to settle and receive the money from the exchange. The difference, or spread, between the trade and value dates can vary from broker to broker and depends on the currency that a trader wishes to receive. Orders for currencies that trade frequently tend to have smaller or no trade/value date spreads. Most trade/value date spreads do not exceed three days, except in the case of weekends and holidays.
Implications
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The trade/value date spread on Forex trades is an important consideration with regard to necessity. In other words, if a trader requires the money from a Forex trade by a specific time, she needs to be aware of how far in advance to place the trade. Custodial banks must also consider Forex trade/value date spreads if their clients hold offshore securities for which they wish to receive (repatriate) dividends and interest in their home currency on the actual payment date.
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