Money is the value of something that you can buying and selling goods and services. Money market is also known as financial market. Money market became a component of the financial markets for assets involved in short term borrowing, lending, buying and selling with original maturities of one year or less. Money market fund is a type of mutual fund. Money market account is same as a type of bank account. Money market trading in money is done over the counter and wholesale. There are different type of money market instruments, including treasury bills, commercial paper, bankers’ acceptances, deposits, certificates of deposit, bills of exchange, repurchase agreements, federal funds, and short lived mortgage and asset backed securities.The instruments are bear differing maturities, currencies, credit risks, and structure. Money markets provide liquidity for the global financial system,and capital markets make up the financial market.
Money market composed of financial institutions and dealers in money or credit who wish to either borrow or lend. Clients borrow and lend for short periods up to thirteen months. Finance companies funding money by issuing large amounts of asset-backed commercial paper,for examples of eligible assets include auto loans, credit card receivables, residential or commercial mortgage loans, and similar financial assets. Some large corporations with strong credit ratings, such as General Electric, issue commercial paper on their own credit. Other large corporations are arranging for banks to issue commercial paper on their behalf. Trading financing companies often purchase bankers’ acceptances to tender for payment to overseas suppliers. Commercial bank is helping to develop money markets and help the commercial banks to become self sufficient. In the urgent situation, when the commercial banks have scarcity of funds, they need not approach the central bank and borrow at a high rate of interest. On the other hand, Money market can meet their requirements by recalling the old short term loans from the money market. Money market is Help to central bank, though the central bank can function and influence the banking system in the absence of a money market. Money markets help central banks in different ways short run interest rates serve as an indicator of the monetary and banking conditions in the country. Money markets help the central bank secure quick and widespread influence on the sub-markets.
Money markets are dealing with different functions, such as to finance trade, finance industry. Financing trade money market plays different role in financing domestic and international trade. Commercial finance is made available to the traders through bills of exchange, it is discounted by the bill market. The acceptance houses and discount markets are helping in financing foreign trade. The money market contributes to the growth of industries by financing, Money market helps industries secure short-term loans to meet their working capital requirements through the system of finance bills, commercial papers, Industries normally need long-term loans, which are provided in the capital market. However, the capital market depends upon the nature and the conditions in the money market. The short term interest rates of the money market influence the long term interest rates of the capital market. but, money market indirectly helps the industries through their influence on long term capital market. most of the profitable investment is money market enables the commercial banks to use their excess reserves in profitable investment. The main purpose of the commercial banks is to earn income from maintain liquidity to meet the uncertain cash demand from the depositors. In the money market, the excess reserves of the commercial banks are invested in near money assets, for example short term bills of exchange are easily converted into cash. In the way commercial banks earn profits without losing or give up liquidity.