The social institution arising from the relationship between sellers and buyers seeking to make exchanges or transactions is known as a money market.
Monetary, from the Latin monetarius, is that which belongs or relates to the currency (the piece of gold or other metal that is used as a means of exchange and, by extension, the legal tender, paper or currency).
The money market, therefore, is a branch within the financial market where financial assets (certificate of deposits, promissory notes, etc.) are traded in the short term. Its purpose is to offer economic agents the option of transforming their wealth into securities with a high degree of liquidity.
For example: “The multinational will go to the money market to get financing,” “The money market shows a very vital role in the local economy.”
The savings banks, and government are the main actors involved in the money market. Other participants are non-banking financial institutions, such as insurance companies.
Participation in the money market can occur through a direct relationship with the issuers of the assets or specialized intermediaries (such as brokerage firms or banks). Reasons to invest in a money market include security, high liquidity, and flexibility.
The assets traded on the money market, then, are characterized by low risk and high liquidity. Within this market, it is possible to distinguish between credit and securities (primary and secondary); the details are exposed below.
Credit Market
Money market It is an inter bank market, with a large specialty in very short-term and wholesale operations. The negotiation of a deposit of money can have a minimum term of one day, and a maximum of one year. This is the market in which the MIBOR is set, a rate of interest used as a reference and belonging to the inter-bank market in Madrid.
On the other hand, the credit market is also responsible for carrying out the REPO operation, an agreement whereby the sale of a financial instrument (which is usually treasury bills) is carried out, with the particularity that the seller assumes the commitment to repurchase it on a date and at a price defined at the time of the first transaction.
Securities Market
* Primary: does not have a certain organization. The person who issues the securities sells them to receive resources in exchange;
* Secondary: this, in turn, contains the stock exchange (which allows the change of ownership of the securities very easily) and the Annotated Public Debt Market, which is defined below.
Also Read : What is Market Economy?
Public Debt Market Annotated
The operation of the Annotated Public Debt Market is telephonic, and its main function is the negotiation of public debt that is represented through book entries and securities whose issuance is in charge of public organisms, the CCAA and other national and international institutions that they have the authorization by the Ministry of Economy and Finance.
It should be mentioned that, in this case, the securities are not presented in physical format, but consist of book entries, made or managed by the State Debt Account Annotation Central, under the responsibility of the Bank of Spain. It is in charge of issuing, amortizing, and paying interest on the total issuance of securities and also of carrying out the organization of the entire market.
Finally, among its members are account holders and management entities; specialist agents and private investors cannot intervene in it.
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