I'm sure I'm missing something fundamental, so please enlighten me!

It seems like just about everything I can trade through my broker I can take physical possession of if I really wanted to, although people rarely do. For example if I purchase 100 shares of MSFT I could request that my broker mail me those shares. The shares would be removed from my electronic account and they would be physically delivered to me. Similarly if I trade futures on a commodity I could end up with bushels of apples if I was so inclined. This is all heavily acknowledged in basic literature on these instruments. Furthermore, I've heard of a "horror story" in a podcast (I believe it was Planet Money) of a trader trading commodities in Chicago who ended up with barges show up at the dock by their office.

However this doesn't seem to be emphasized or talked about in FOREX spot markets. I've always heard that you must go through a bank or exchange house in order to convert money from say USD to GBP. I've also heard, and seen, that you never get the current exchange rate that the currency pair is trading at in the markets unless you're exchanging millions of USD in value.

So my question is could I decide I like the current exchange rate a month before a trip to Europe. Since I want that exact exchange rate I buy $4,000 USD worth of Euros in a FOREX trade, with an account I funded in USD, and request that the Euros are delivered to me (preferably in cash) before my trip? If not why since everything else seems to be backed by something physical that can be delivered?

Both current answers talk about FOREX futures. I'm asking about spot markets. In Investopedia under FOREX spot markets it has this blurb:

More specifically, the spot market is where currencies are bought and sold according to the current price. That price, determined by supply and demand, is a reflection of many things, including current interest rates, economic performance, sentiment towards ongoing political situations (both locally and internationally), as well as the perception of the future performance of one currency against another. When a deal is finalized, this is known as a "spot deal". It is a bilateral transaction by which one party delivers an agreed-upon currency amount to the counter party and receives a specified amount of another currency at the agreed-upon exchange rate value. After a position is closed, the settlement is in cash. Although the spot market is commonly known as one that deals with transactions in the present (rather than the future), these trades actually take two days for settlement.

Since one party delivers me the "agreed upon currency amount" and I have given them the "specified amount" of USD shouldn't I be able to physically receive the "agreed upon currency amount?" To further emphasize that I'm really getting the other currency for my USD there is this quote from the same Investopedia page (emphasis mine):

forex trading in the spot market always has been the largest market because it is the "underlying" real asset that the forwards and futures markets are based on.

In my mind this reinforces in my mind that my account is actually receiving EUR or whatever currency I'm buying since it is described as a "real asset" because I assume it is real like real estate. This is why I was equating currency to stock certificates. I give you my USD and you give me in exchange little certificates called EUR if I was trading EUR/USD.

If that is truly the case then I feel my question is logical. If the truth is I'm buying an instrument that is called EUR/USD that I can only enter and exit in USD, or GBP/JPY that I can only enter and exit in JPY, then my question is nonsensical. That would also make the answers' focus on futures make perfect sense because futures would be the only vehicle to actually get the underlying asset, and the spot market would be a public sentiment litmus test of sorts.

I flagged myself as a duplicate of How can one take delivery on the FOREX market? but I have retracted that flag because that question is primarily concerned with "How." What I'm trying to ask is "Why not." This isn't addressed at all in the accepted answer, and is really what I'm interested in. Furthermore it is countered by this question How does FOREX trading work? trading vs exchanging whose answers state it is possible. The idea isn't novel, but there seems to be great confusion and misinformation. What is interesting to me is WHY it can't be done, if it can't be done. If it can be done what are the barriers beyond ignorance that the possibility exists?

  • "For example if I purchase 100 shares of MSFT I could request that my broker mail me those shares." That's not right, I don't think paper common stock certificates are even being printed anymore. And regarding taking delivery of your Forex contract at expiration, they will likely want to wire money to you not send an envelope of cash.
    – quid
    Jun 22, 2017 at 17:30
  • @quid yes there is a fee but it is possible with TD Ameritrade at least. I'm sure that it is with other brokers too. I also assume there would be a shipping fee if I were to hold a commodity contract long enough for it to be delivered too. Furthermore since TD Ameritrade accepts stock certs for deposit then I'm certain other brokers can issue them.
    – Erik
    Jun 22, 2017 at 17:32
  • @quid I agree an envelope of cash isn't likely, although if I have a brokerage through a major bank like Wells Fargo I don't see why I couldn't arrange to pick up Euros at a local branch. Similarly I don't know why I couldn't have an equivalent of a cashier's check mailed to me that I could have cashed, even if I need to make prior arrangements with a bank to cash it.
    – Erik
    Jun 22, 2017 at 17:45
  • @Erik, many/most contracts are technically "cash settled", can google. regarding physically settled, yes it's commonplace for actual agribusiness, oil business etc. to literally physically settle.
    – Fattie
    Jun 22, 2017 at 19:40
  • @Fattie Forgive my ignorance but when I read "contracts" I think futures/options. Are you referring to that or to closed FOREX transactions? Assuming we're talking about FOREX transactions where I can trade $4,000 USD for X EUR I've always believed that the X EUR is held on the books as X EUR so it is technically "cash settled" as X EUR. That is why I believe it should be possible to receive delivery of that X EUR in the form of cash or a check/draft that I can bring to a bank for X EUR. So can I cross from technical to real money in my hand. If no then why If yes then why isn't commonly known
    – Erik
    Jun 22, 2017 at 19:49

2 Answers 2


Because the standard contract is for 125,000 euros.


You don't want to use Microsoft as an analogy. You want to use non financial commodities. Most are settled in cash, no delivery. But in the early 80's, the Hunt brothers caused a spectacular short squeeze by taking delivery sending the spot price to $50. And some businesses naturally do this, buying metal, grain, etc. no reason you can't actually get the current price of $US/Euro if you need that much.

  • I think the contract size is the core to the real answer. Interestingly this answer suggests that smaller sizes are possible but anti-laundering laws might make it difficult.
    – Erik
    Jun 22, 2017 at 18:01
  • 1
    This might be the basis for another question but can you please explain to me how futures contracts relates to the FOREX market? I understand a futures contract generically states I want X units of Y commodity for Z price at specified date. In contrast the FOREX market feels much like the stock market where dollars/euros/yen/etc. are the stock certs. I think this is why there is much talk about currency supply and central banks adjusting the amount of currency in the market in FOREX literature. TLDR; a futures contract feels related to the FOREX market but distinct.
    – Erik
    Jun 22, 2017 at 18:22
  • @Erik If you're not buying futures (which is really more what you're describing), you're buying on the spot market - which means you're just making the exchange now. You pay whatever market maker you choose and get the currency. It's not an interesting question, though: sure, of course you can do that. Walk up to your bank window.
    – Joe
    Jun 22, 2017 at 19:03
  • @Joe I agree that the goal is what a standard futures contract is designed for, so I up-voted this answer. The deeper question is there seems to be confusion if you can use the FOREX market like an exchange house since this says no and this says yes. I want clarification, not confusion. I also want to know the reason why it isn't possible (if it truly isn't possible) in smaller amounts than a futures contract, since other tradable securities with a physical backing can be realized/delivered.
    – Erik
    Jun 22, 2017 at 19:28
  • but you can only get delivery of a whole contract's worth man.
    – Fattie
    Jun 22, 2017 at 20:02

As far as I understand, OP seems to be literally asking:

"why, regarding the various contracts on various exchanges (CBE, etc), is it that in some cases they are 'cash settled' and in some 'physically settled' -?"

The answer is only that "the exchange in question happens to offer it that way."

Note that it's utterly commonplace for contracts to be settled out physically, and happens in the billions as a daily matter. Conversely zillions in "cash settled" contracts play out each day. Both are totally commonplace.

Different businesses or entities or traders would use the two "varieties" for sundry reasons.

The different exchanges offer the different varieties, ultimately I guess because they happen to think that niche will be profitable. There's no "galactic council" or something that enforces which mode of settlement is available on a given offering - !

Recall that "a given futures contracts market" is nothing more than a product offered by a certain exchange company (just like Burger King sells different products).

I believe in another aspect of the question, OP is asking basically: "Why is there not, a futures contract, of the mini or micro variety for extremely small amounts, of currency futures, which, is 'physically' settled rather than cash settled ..?"

If that's the question the answer is just "whatever, nobody's done it yet". (Or, it may well exist. But it seems extremely unlikely? "physically" settled currencies futures are for entities operating in the zillions.)

Sorry if the question was misunderstood.

  • No worries. I'm sorry for writing a confusing question. I clearly have some confusion on the subject which is hindering my ability to ask my question in a coherent manner.
    – Erik
    Jun 22, 2017 at 20:26
  • 1
    Interest rate futures always settle in cash. There's no item to deliver. Jun 22, 2017 at 20:55
  • @JoeTaxpayer would "Interest rate futures" be another term for the forward market?
    – Erik
    Jun 22, 2017 at 21:09
  • 1
    @Erik, uttely no need to apologize on a QA site; maybe my comments (even if not precisely what you wanted to know) will help other googlers in the future.
    – Fattie
    Jun 22, 2017 at 21:40
  • No, Erik, reread the article you linked. Anything I'd say would just repeat lines from there. Jun 23, 2017 at 10:03

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