Sie sind auf Seite 1von 5

Define Money Components

Market

and

Its

Money market securities include Treasury bills (T-bills), certificates of deposit (CDs), repos and commercial paper. The money market is a financial market that specializes in short-term debt securities, or debt instruments that mature in less than a year. The most common money market securities are Treasury bills (T-bills), certificates of deposit (CDs), commercial paper, bankers' acceptances (BAs), eurodollars and repos. Money market securities usually are issued by large corporations, financial institutions and governments. Participants
o

The money market usually is open to merchant banks, large companies, central banks, institutional and retail money market funds and other institutional investors. However, certain money market instruments, such as Treasury bills, can be sold directly to the general public. The money market is distinct from other financial markets. Money market securities normally are issued by trustworthy entities such as large corporations, financial institutions and governments. Accordingly, their default risks are low. All financial instruments reflect a risk-profitability trade-off. If you choose high returns, you will get high risk, and vice versa. Because money market instruments offer low risk, their returns are significantly lower than those of other securities. The most liquid money market securities are T-bills, short-term fixed-income securities issued by the U.S. government. They can have three-month, six-month and one-year maturities. They are sold for a price that is lower than their par, or face, value.

Returns
o

Main Instruments
o

When they mature, the government pays their face value. The difference between the price for which a T-bill is bought and its par value constitutes interest. The closer a T-bill's maturity, the more expensive it becomes to buy it. A certificate of deposit is a time deposit with a financial institution. CDs can be issued by financial institutions such as commercial banks or credit unions. Certificates of deposit have slightly higher yields than T-bills, reflecting the higher risk associated with possible default of their issuers; it is highly unlikely that the U.S. government will default. Commercial paper is a collective term describing unsecured short-term securities issued primarily by large corporations. In issuing commercial paper, corporations manage to get a lower interest rate than on normal bank loans. Commercial paper usually pays for companies' accounts receivable and inventories. Their maturities average one to two months, although they can be as long as nine months. Other Securities
o

Other securities also make up the money market. A bankers' acceptance is a time draft that guarantees a bank's payment of a specified amount of money to a person (or company) or the bearer of a BA at a certain period of time. BAs are used to finance trade in goods and are traded as money market instruments on the secondary market. Their maturity is usually up to six months.

Eurodollars and repos are traded primarily by financial institutions. Eurodollars are U.S.-dollar-denominated deposits made at a bank or bank branch outside of the United States. Eurodollar deposits usually are made in large amounts of money with maturities of up to six months. Repos or repurchase agreements are agreements that allow one party to deposit a secure financial instrument , such as a T-bill, with another and borrow against it a specified amount of money with a fixed interest rate, securing the right to repurchase the underlying security at a specified time. The maturities of these securities are short, normally ranging from one to 30 days. Alternatives

Investors have other options for where to put their money. They can choose stocks, precious metals, real estate and debt market instruments, which are primarily corporate bonds with long-term maturities.

Structure of Indian Money Market - Chart The entire money market in India can be divided into two parts. They are organised money market and the unorganized money market. The unorganised money market can also be known as an unauthorized money market. Both of these components comprise several constituents. The following chart will help you in understanding the organisational structure of the Indian money market.

Components, SubMarkets of Indian Money Market After studying above organisational chart of the Indian money market it is necessary to understand various components or sub markets within it. They are explained below. 1. Call Money Market : It an important sub market of the Indian money market. It is also known as money at call and money at short notice. It is also called inter bank loan market. In this market money is demanded for extremely short period. The duration of such transactions is from few hours to 14 days. It is basically located in the industrial and commercial locations such as Mumbai, Delhi, Calcutta, etc. These transactions help

stock brokers and dealers to fulfill their financial requirements. The rate at which money is made available is called as a call rate. Thus rate is fixed by the market forces such as the demand for and supply of money. 2. Commercial Bill Market : It is a market for the short term, self liquidating and negotiable money market instrument. Commercial bills are used to finance the movement and storage of agriculture and industrial goods in domestic and foreign markets. The commercial bill market in India is still underdeveloped. 3. Treasury Bill Market : This is a market for sale and purchase of short term government securities. These securities are called as Treasury Bills which are promissory notes or financial bills issued by the RBI on behalf of the Government of India. There are two types of treasury bills. (i) Ordinary or Regular Treasury Bills and (ii) Ad Hoc Treasury Bills. The maturity period of these securities range from as low as 14 days to as high as 364 days. They have become very popular recently due to high level of safety involved in them. 4. Market for Certificate of Deposits (CDs) : It is again an important segment of the Indian money market. The certificate of deposits is issued by the commercial banks. They are worth the value of Rs. 25 lakh and in multiple of Rs. 25 lakh. The minimum subscription of CD should be worth Rs. 1 Crore. The maturity period of CD is as low as 3 months and as high as 1 year. These are the transferable investment instrument in a money market. The government initiated a market of CDs in order to widen the range of instruments in the money market and to provide a higher flexibility to investors for investing their short term money. 5. Market for Commercial Papers (CPs) : It is the market where the commercial papers are traded. Commercial paper (CP) is an investment instrument which can be issued by a listed company having working capital more than or equal to Rs. 5 cr. The CPs can be issued in multiples of Rs. 25 lakhs. However the minimum subscription should at least be Rs. 1 cr. The maturity period for the CP is minimum of 3 months and maximum 6 months. This was introcuced by the government in 1990. 6. Short Term Loan Market : It is a market where the short term loan requirements of corporates are met by the Commercial banks. Banks provide short term loans to corporates in the form of cash credit or in the form of overdraft. Cash credit is given to industrialists and overdraft is given to businessmen.

Composition of money market The money market is not a single homogeneous market. It consists of a number of sub-markets which collectively constitute the money market. There should be competition within each sub-market as well as between different sub-markets. The following are the main sub-markets of a money market: Call Money Market. Commercial Bills Market or Discount Market. Acceptance Market. Treasury bill Market.

Das könnte Ihnen auch gefallen