The
international financial market where short term trading take place is called the
money market. The money market is meant to make available the liquid funding to the financial system of the world and this liquid funding is provided for a short period. The trading of the money market consists of the Treasury Bills, Commercial Paper,etc.
As a financial market,
money market is very much secured in comparison to the other markets. The main participants or the borrowers and lenders of this market are the financial organizations, huge corporations and the governments of various countries. The participants of the market take part in the proceedings to make sure that their money resources are in a good condition. It may have many similarity with the bond market but the primary difference is between the participants of both the market. Again the money market is, as described, a short term market but the bond market is usually a long term market. The money market deals in the 'paper', which is an financial instrument for a short span of time. The term generally consists of 12-13 months.
When national governments or the giant corporations borrow money, it is a
money market. The proceedings of the money market and the stock market is very close to each other but both are not the same thing. The main difference is the huge funds that are dealt by the money market. Again, the stock market is meant for the individuals but the money market has some different trends and the individual investor has very little to do in this market.
Although the returns of this market is comparatively low, the security factor of the market prompts the investor to put his or her money in this market. According to the trend, any individual investor cannot enter the market directly simply because of the giant size of the participants. But through the money market mutual funds, an individual can take part in the proceedings. The treasury bills are another portion provided to the individual investor.
Some of the money market instruments are:
- Certificate of Deposit
- Bankers' Acceptance
- Federal Agency Short-Term Securities
- Commercial Paper
- Repurchase Agreement
- Treasury Bills
- Money Market Mutual Funds
- Municipal Notes
- Euro Dollar Deposit
- Federal Funds
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