Money Market and Money Markets Instruments Abroad

In: Business and Management

Submitted By vishesh8
Words 2004
Pages 9



The money market is the arena in which financial institutions make available to a broad range of borrowers and investors the opportunity to buy and sell various forms of short-term securities which are highly liquid and are relatively low-risk debt instruments. The maturities of money market instruments range from one day to one year and are often less than 90 days. It comprises of the call and notice money market, repo market and the market for debt instruments. There is no physical "money market." Instead it is an informal network of banks and traders linked by telephones, fax machines, and computers.
Banks financial institutions, companies and government are the key participants in the money market. The size of the transactions in the money market typically is large ($100,000 or more). At the center of this web is the central bank whose policies have an important bearing on the interest rates in the money markets. The money market provides an equilibrium mechanism for levelling out the demand and supply of short term funds and serves as a focal point for the intervention by the central bank (RBI in India) for influencing the liquidity and interest rates in the financial systems.The money market is important for businesses because it allows companies with a temporary cash surplus to invest in short-term securities; conversely, companies with a temporary cash shortfall can sell securities or borrow funds on a short-term basis. In essence the market acts as a repository for short-term funds. Large corporations generally handle their own short-term financial transactions; they participate in the market through dealers. Small businesses, on the other hand, often choose to invest in money-market funds, which…...

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