Unlike currency futures market, the settlement in the OTC spot market happens by actual delivery of currency. The mechanism of settlement where each counterparty exchange the goods traded on the maturity of contract is called as gross settlement and the mechanism where market participants only settle the difference in value of goods is called as net settlement
In OTC currency market, settlement date is also called as value date. Please note that value date is different from trade date. On trade date, the two counterparties agree to a transaction with certain terms (currency, price, and amount and value date). The settlement of the transaction, when counterparties actually exchange currency, is called as value date.
The most important value date is the 'spot' value date, which is settlement after 2 business days. In practice, it can be after '2 business days' because the settlement takes place in two different centers that may have different holidays.
The correct definition of spot value date is settlement on second business day, subject to both centers being open on that day.
The forward OTC market can provide quotes for booking a forward contract for any maturity. However, the liquidity is high for maturity less than 1 year and beyond that liquidity is less.
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