Saturday, August 22, 2009

Money Market

Money market is a financial market for short terms loans. It is a market for short term borrowing and lending of funds. It is defined as “a financial market in which only short term debt instruments having maturity of less than one year are traded”.
The main features of money market are given as under.
(i) Money market has buyers and sellers in the form of borrowers and lenders. The borrowers are the traders, manufactures, speculators. The lenders in the money market are the Central Bank, Commercial Banks etc.
(ii) It deals with short term credit instruments such as Treasury bills of exchange etc.
(iii) Money market securities are more widely traded and are liquid.
(iv) Short term securities have smaller fluctuation in prices. Therefore they are considered sage investment.
(v) Money market operates through various financial institutions such as Central bank, Commercial banks, non bank financial intermediaries, bill brokers.
(vi) Money market is not a single homogenous market. It is composed of several sub markets. Each market deals with specific short term credit instruments e.g. call money market, trade bill market etc.

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