Foreign Exchange dealings take place on the Foreign Exchange market, they may be subject to Exchange Control.
The Foreign Exchange market consists of the exchange dealers of the banks and the exchange brokers. It is made up of two sections: the spot market for spot transactions, and the forward market for forward transactions.
Spot transactions are foreign exchange transactions that have to be settled promptly, forward transactions have to be settled on an agreed future date. The price of one currency in terms of another is called the rate of exchange or exchange rate.
There are different rates for the different exchange instruments, The rates at which the banks sell foreign exchange (selling rates) are higher than the rates at which they buy (buying rates). Spot transactions are concluded at the spot rate and forward transactions at the forward rate.
The forward rate may be higher or lower than, or on the same level as, the spot rate. If the forward rate is above the spot rate, the difference is called the premium, if the forward rate is below the spot rate, the difference is known as a discount. If the forward rate is on the same level as the spot rate, they are known as at par.