Forward Contracts, Limit Orders and Spot Contracts: What They Actually Do

Spot contract — exchanging at today’s rate

A spot contract is the default: you agree to exchange one currency for another at today’s rate, and OFX’s PDS defines it as settling within two business days of being booked. You’ll have up to those two business days to get the funds to the provider; once they clear, the money is sent on to the recipient. This is the product behind “send it now” — there’s no future date being negotiated, and no deposit structure, because the whole transaction happens close to immediately.

Forward contract — fixing today’s rate for a later date

A forward contract lets you agree an exchange rate now for a transfer that actually settles later — up to twelve months out, per OFX’s PDS. You know exactly what rate you’ll get on the agreed date, which removes the uncertainty of waiting and hoping. The same document is explicit about the cost of that certainty: locking in a rate also means giving up any exchange-rate movement that later turns out to be in your favour, in either direction.

OFX’s PDS specifically names the situations a forward contract is intended for beyond its more common commercial use hedging import and export invoices — among them, buying or selling property overseas, receiving pension payments from another country, sending or receiving funds to or from a family member, and, in its own words, being useful “when they are for example migrating.” It is a named, intended product for exactly this kind of large personal transfer, not a repurposed business tool.

A forward contract isn’t free to hold. OFX’s PDS states it will normally ask for an advance payment of up to 10% of the transaction value as security, at its discretion, and that it may ask for more later if the exchange rate moves in a way that increases its own exposure on the deal before your settlement date arrives.

Limit order — waiting for a rate you choose

A limit order is different again: rather than transacting now, you nominate a target exchange rate and the deal only becomes binding if and when the market reaches it. OFX describes it plainly in its own FAQ: “Limit Orders let you target an exchange rate that suits you or your business. Once it’s triggered we’ll contact you to complete your transfer.” Until the target is hit, you can amend or cancel it.

The trade-off runs both ways. There’s no guarantee the market ever reaches your target rate, so a limit order can simply expire unfulfilled. And once it is triggered, OFX’s FAQ is direct about the consequence: “the transfer is binding and cannot be canceled” — even if your own circumstances have changed by then. It is a genuinely different commitment from a forward contract, which is fixed the moment you book it; a limit order is fixed the moment the market decides for you.

What “margin” means, and why a fee-free transfer still has a cost

OFX’s PDS defines margin, in its glossary, as “the difference between the exchange rate we pay our provider, which we access through the wholesale foreign exchange market, and the rate that we quote to you.” That single sentence explains a common source of confusion: a bank or app advertising “no transfer fee” hasn’t necessarily made the transfer free — it may simply be building its cost into the exchange rate itself rather than charging it as a separate line item, which is harder for a customer to see or compare on a bank statement.

This is also why the rate shown on a comparison site at the moment you’re browsing isn’t necessarily the rate you’ll get: the wholesale market moves continuously, and a quote isn’t locked to you until you’ve actually booked a deal with a provider.

What happens if plans change

A limit order that hasn’t triggered yet can simply be cancelled with no consequence. A forward contract is a different matter once it’s booked. OFX’s PDS explains that ending one early crystallises the position at that moment: if the currency has moved in a way that leaves OFX out of pocket on the matching transaction it entered into on your behalf, “you will be liable to pay us the amount of that loss, together with any reasonable expenses or other costs we incur as a result” — a liability the PDS notes could exceed any advance payment already held.

OFX may, at its discretion, agree to extend a forward contract’s settlement date instead of terminating it — its PDS calls this a rollover — but describes this as something it “may” agree to rather than an automatic right, and capped at twelve months from the original booking date, with the rate on the extension potentially different from the original.

Which product fits which situation

None of this article is telling you which product to use — Migratio doesn’t hold an Australian Financial Services Licence and doesn’t give personal financial advice, and a genuine specialist FX provider will generally want to understand your specific transfer before quoting on it anyway. What the products are built for differs mechanically: a spot contract suits money that needs to move now; a forward contract suits a transfer tied to a known future date, such as a property settlement or a fixed visa payment deadline, where certainty about the final number matters more than chasing a better rate; and a limit order suits a transfer that isn’t urgent but where you’re only interested in dealing at a specific rate, and are comfortable that the deal becomes final the moment it’s reached.

How long does a spot contract take to settle?

OFX’s PDS describes a spot contract as settling within two business days of being booked, once the funds you’re sending have cleared into the provider’s account.

How far in advance can I book a forward contract?

Up to twelve months, per OFX’s PDS. A transfer that’s further out than that would need a different approach, such as booking a forward contract closer to the date once it’s within that window.

Do I have to pay a deposit on a forward contract?

Usually, yes. OFX’s PDS describes an advance payment normally up to 10% of the transaction value, held as security, at the provider’s discretion — and notes it may ask for more later if the exchange rate moves against its own position on the deal.

Can I cancel a limit order?

Yes, at any point before it triggers. Once the target rate is reached, OFX’s own FAQ states the transfer becomes binding and cannot be cancelled.

Is a forward contract the same as buying currency now and holding it?

No. Booking a forward contract doesn’t exchange the currency immediately — it fixes a rate for a future settlement date, and you still deliver the full amount you’re selling on that date. Holding already-converted currency is a different arrangement with different considerations.

What happens if I can’t settle a forward contract on the agreed date?

OFX’s PDS states that not settling by the maturity date puts you in breach of the contract, and the provider may terminate it — which crystallises any gain or loss on the exchange rate at that point and can leave you liable for a loss beyond your deposit.