Money market is a wholesale market for low risk, highly liquid short term prommissory notes /financial assets that are close substitute of money. It is also a market for various sorts of debt securities rather than equities, banks actively participate in money market. Transactions include outright or repo transactions. In other words money market embraces not only open market but also near money liquid asset market.
The important feature of money market instrument is it is liquid and can be terned over quickly at low cost and it provides an avenue for equilibriating the short term surplus funds of lenders and the requirements of borrowers
It deals in high value transactions Hence it is also called whole sale financial market.It is basically a telephone marketand and most of the deals are matured over telephone. Deals are honoured when concluded. Movements are determined by liquidity in market.The effect of movement of rate is reflected in the prices of various securities. In tight money conditions the yield of securities move up and under easy money conditions the yield of securities decline.
The basic function of money market is to provide efficient facilities for adjustment of liquiditiy position of commercial bank, non banking financial institutions,business corporates and other investers.
No comments:
Post a Comment