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Also called spot or physical market, a cash market is one in which securities or commodities are sold for cash and immediate delivery. Immediate here means one month or less.
Foreign exchange markets are some of the largest cash markets.
In the cash market, exchange of goods and money between the seller and the buyer takes place in the 30-day window, while in the futures market it happens on a specified future date.
Ownership gets transferred promptly and payment is made on delivery in the cash market.
Cash market transactions can take place either on a regulated exchange or over-the-counter (OTC). In contrast, transactions involving futures are conducted exclusively on exchanges, while forward transactions, such as of currencies, are generally executed on the OTC market.
Usually, for commodities, the price in the cash market is lower than that in the futures market. This is because futures deal involve carrying costs, such as for storage and insurance, until delivery happens.
Cash market is influenced solely by supply and demand, whereas the futures market is influenced by expectations on prices, storage costs, weather predictions (for perishable commodities in particular) and so on.
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