Value Date

A value date is the date on which a payment, deposit or trade is treated as settled: the day from which funds are available to the recipient and from which interest starts or stops accruing. Banks use it to work out availability and interest, and dealers use it to fix when each side of a trade is delivered.

The value date is not the same as the booking date (or posting date), the day an entry is recorded in the account. The two often coincide, but a deposit made late on a Friday may be booked that day and valued on Monday, and a foreign exchange trade agreed today usually has a value date two business days later. In securities markets the equivalent term is the settlement date.

Think of a coat check. A guest hands over a coat and gets a ticket at once, but the coat is only ready to collect once the attendant has hung it up and logged it. The ticket is the booking; the moment the coat can actually be collected is the value date.

With money, the value date answers two everyday questions: when can I use these funds, and from when do they earn or cost interest? If a salary is paid with a value date of the 25th, the money counts as the employee's from the 25th, even if the bank statement shows the line a day earlier or later. For businesses moving large sums, a single day's difference in value date can change the interest owed noticeably.

In cross-border payments the value date is carried in the payment message itself. In the SWIFT MT103 customer transfer, field 32A combines the value date (in YYMMDD form), the currency code and the interbank settled amount, for example :32A:261106EUR25000,00. In ISO 20022 messages such as pacs.008, the same information appears as the interbank settlement date.

The value date tells the receiving bank when it should expect cover and when to credit the beneficiary. For an international wire transfer, the sending bank must fund its nostro account in the destination currency by that date. If the funds arrive late, banks may claim compensation for lost interest from the bank that caused the delay, a process known as a value-date or back-value adjustment. Mismatched value dates are a common item in reconciliation.

In the FX market the value date is the day on which the two currencies change hands. A spot trade normally settles two business days after the trade date (T+2), a convention that gives banks in different time zones time to confirm and fund the deal. Some pairs settle sooner: US dollar against Canadian dollar, for example, settles one business day after the trade. The spot rate is the price for that standard value date.

Any later date is a forward value date. A forward contract fixes the exchange rate today for delivery on a chosen future value date, and an FX swap pairs two trades with different value dates. Because each currency must be a business day in both countries, holidays can push a value date back. Delivering one currency before receiving the other on the value date creates Herstatt risk, which CLS reduces by settling both sides together.

Interest on a balance accrues from the value date, not the booking date. For a simple money-market calculation on an actual/360 basis, common for euro and US dollar deposits, the interest due is:

• $I$ is the interest due.
• $P$ is the principal, the amount deposited or lent.
• $r$ is the annual interest rate, written as a decimal.
• $d$ is the number of days from the value date to the maturity date.

Suppose a company places €2,000,000 at 3% for a period that starts on the value date and lasts 30 days. The interest is 2,000,000 multiplied by 0.03 and by 30/360, or €5,000. If the bank gave the deposit a value date two days later, $d$ would fall to 28 and the interest to about €4,667, a loss of roughly €333 to the depositor. This is why rules on value dating matter.

In the European Union, the second Payment Services Directive (PSD2) limits how banks can use value dates to their advantage. The credit value date for the payee's account must be no later than the business day on which the payee's provider receives the funds, and the debit value date for the payer's account must be no earlier than the time the account is debited. These rules stop banks from earning float by delaying credits or backdating debits. In the United States, funds availability for deposits is governed separately by Regulation CC, which sets maximum hold periods for checks and other deposits. In securities markets, the settlement cycle sets the value date: the US moved to T+1 in May 2024, and the EU, UK and Switzerland are due to follow on 11 October 2027.

• Directive (EU) 2015/2366 on payment services (PSD2)
• Swift: ISO 20022