Meaning of Money Market:

The money market refers to a part of the financial market where short-term lending and borrowing of funds takes place. It deals with financial instruments with high liquidity and short maturities, that is less than one year. The features of money market is to facilitate liquidity and financing facilities for various participants in the economy. The member participants in the money market are banks, financial institutions, corporations, governments, and the instruments of money market include treasury bills, commercial paper, certificates of deposit, repurchase agreements, and short-term bonds.

The structure of money market includes.

1. Organized money mark

2. Unorganized money market.

Organized money market means the presence of Central Bank, all scheduled commercial banks, Cooperative banks, and financial institutions like Life insurance corporation , General insurance corporation, Foreign exchange bank etc.

Unorganized money market includes indigenous bankers, moneylenders, traders, merchants, landlords, pawn brokers, chit funds etc.

Features of organized money market.

1. Short-term Instruments: Organized money markets primarily deal with short-term financial facilities, with maturity period from overnight to one year. These facilities provide the member participants with a means to manage liquidity and meet short-term funding needs.
2. Liquidity: Liquidity is a great feature of organized money markets. Member participants can easily buy and sell financial instruments with minimum costs and without any serious impact on the market prices. This liquidity assures that the member participants can quickly and easily access funds or invest excess cash as needed.
3. Multiple Participants: Organized money markets made up of the number of participants. Each participant may have different objectives, such as managing cash reserves, financing short-term operations, or investing excess funds.
4. Regulation: Money markets are subject to regulation to ensure transparency, stability, and investor protection. The regulatory bodies such as central banks impose rules and regulations regarding the issuance, trading, and disclosure of money market instruments.
5. Standardized Instruments: Money market instruments usually have standardized features, such as fixed maturities, interest rates, and minimum denominations. This standardization improves market efficiency and facilitates trading among participants.
6. Low Risk: The instruments in the money markets are generally considered as low-risk investments due to their short maturities and high liquidity. However, like all investments, they are subject to credit, interest rate, and liquidity risks.
7. Transparency: Transparency is crucial in organized money markets to foster trust and confidence among participants. Market participants have access to timely and accurate information regarding the pricing, trading volume, and credit quality of money market instruments.
8. Participants: Common participants in organized money markets include commercial banks, investment banks, mutual funds, pension funds, insurance companies, and government enterprises. These participants engage in various activities such as borrowing, lending, investing, and trading money market instruments.
9. A central bank: Presence of one sole powerful central bank authority is the best feature of organized money market.
10. Organized banking system: proper banking system banks supplies loans and borrows funds.
11. Specialized sub markets: a market consist of a number of specialized sub markets dealing with various credit instruments like call loans, the bill market, Treasury bill market, foreign exchange market etc.
12. Existence of large near money assets: The money market has a large number of near money assets of various types such as bill of exchange, promissory notes, Treasury bill, security bonds etc.
13. Integrated interest rate structure: Interest rate prevails in the sub markets are integrated to each other proportional changes in every bank.
14. Adequate financial resources: easy access to financial resources from both within and outside the country.

also read: explain the features of unorganized money market.