The field of finance and banking has many specialized concepts and terms that many people do not understand. In which, the concept of money market associated with economic development deserves attention. So What is money market?? What are the characteristics and functions of the money market?
What Is Money Market?
Money market - Money market is a short-term capital market (under 1 year) where short-term capital supply and demand activities such as bank loans, securities trading, certificates of deposit, treasury bills are held. Short-term capital includes valuable papers of short term, term, low risk and high liquidity.
In other words, the foreign exchange market is a place where everyone in the world can exchange, buy and sell foreign currencies. This market operates 24 hours a day, every day of the week.
The money market consists of five sub-markets: the deposit market, the credit market, the interbank market, the open market, and the treasury bond market.
Features of Money Market
The main features of the money market are:
- The money market has no specific regulations and is not subject to the supervision of any agency or organization.
- The currency market is global, international transactions through the internet are the main ones.
- This market exists in currency exchange offices, in state-owned banks and in commercial banks around the world.
- The market is the intermediary between borrowers and lenders, commercial banks.
- The money market mainly deals with buying and selling financial instruments with maturity within 1 year, short-term capital turnover.
- Money market instruments have high liquidity, bringing interest, interest, and profit to investors.
- The basic operations of the money market are options for futures, expirations, swaps, etc.
Functions Of The Money Market
The function of the money market is:
- Mobilizing capital, meeting short-term capital needs of investors.
- Helping investors have the opportunity to invest, buy, sell, and trade currencies for financial development.
- Economic growth and financial stability of the country through investment in securities, finance, currency.
- Facilitates saving international payments and moving goods around the world easily.
Currency Market Participants
Participants in the money market include:
- Government: participate as issuers of bills, managers.
- Central bank: participate to regulate the market.
- Commercial banks and financial institutions: participate in the market to raise capital from people through savings deposit packages, issue and trade valuable papers, convert money into capital for businesses and individual business households through credit.
- Enterprises and economic organizations: participate in the market as a party in need of business capital.
- Individuals, social organizations: participate to trade in currency and valuable papers or borrow capital for business investment.
Money Market Circulating Instruments
The five basic instruments circulating in the money market are treasury bills, bank bills, savings certificates, commercial papers, and commercial promissory notes.
Is a short-term debt securities issued by the State to circulate money, balance budget revenue and expenditure, fight inflation and promote economic development. This type of bill has a term of less than 1 year and receives interest at maturity.
Bank promissory note
Is a type of security with terms of 3 months, 6 months, 9 months to 12 months, issued by commercial banks and financial institutions to mobilize capital and make loans with the characteristics of low risk and no impact on the market. action if the price changes.
Commercial promissory note
Commercial promissory notes will be issued by production and business enterprises, used instead of promissory notes to pay to units or individuals providing goods or services to the business. In the commercial paper, there is a time limit for debt repayment and the interest rate to maturity will be paid by the unit with both capital and interest.
Is a short-term debt instrument for the bank to sell to savers with a fixed interest rate as agreed upon and upon maturity, to be fully repaid the original face value.
A valuable certificate that recognizes an order demanding payment or a commitment to pay with no additional conditions for a certain period of time. Payers are responsible for making payments on time, without delay.
What is money market? Money market is a short-term capital market, a place to exchange financial instruments to help investors create conditions for their development, international payment and circulation of goods.
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