Value Tomorrow (Tom)
A transaction that settles on the next business day (T+1), one day before standard spot settlement.
Value tomorrow (Tom) settles trades the next business day, one day before standard spot T+2. Banks use it for faster cash management, at a rate adjusted by a one-day swap.
Value tomorrow, shortened to Tom, is a settlement convention where currencies are exchanged on the next business day after the trade date (T+1). This is one day earlier than standard spot settlement of T+2. Tom transactions are used by banks and institutional traders who need faster settlement for cash management. The rate differs slightly from spot, adjusted by a one-day swap point.
How It Works
- A Tom trade on Monday settles on Tuesday, versus Wednesday for standard spot
- The Tom rate is derived from spot adjusted by overnight swap points
- Tom/Next swaps bridge the gap between T+1 and T+2 settlement
- Primarily used in the interbank market rather than retail trading
Trading Tips
Tom settlement is mainly relevant for institutional and corporate treasury desks
Understanding Tom settlement helps you grasp how your retail broker's daily rollover works
The rate difference from spot is usually minimal for major currency pairs
Related Terms
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