difference between money market
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Difference Between Money Market & Capital Market:
Money market is a place where banks deal in short term loans in the form of commercial bills and treasury bills. But capital market is a place where brokers deal in long term debt and equity capital in the form of debenture, shares and public deposits.
In money market maturity date of repayment may after one hour to 90 days. But in capital market, loans are given for 5 to 20 years and if issue of shares by co. , its amount will repay at winding of company . But investors have right to sell it to other investors if they need the money.
Rate of interest in money market is controlled by RBI or central bank of any country. But capital market’s interest and dividend rate depends on demand and supply of securities and stock market’s sensex conditions. Stock market regulator is in the hand of SEBI.
In USA, money market is famous with dealing of money fund and banker’s acceptance instruments. But capital market in USA is famous with New York stock exchange and stock regulator is Security exchange commission (SEC).
The subject matter of capital market is long-term financial instruments having
maturity of more than one year. on the other hand, the thrust of MM is on
short-term instruments only.
Money market is a wholesale market and the participants in money market are
large institutional investors, commercial banks, mutual funds, and corporate
bodies. However, in case of capital market even a small individual investor
can deal by sale/purchase of shares, debentures or mutual fund units.
In capital market, the two common segments are primary market and
secondary market. Both these segments are interrelated. Securities emerge in
primary segment and their subsequent dealings take place in secondary
market. However, in case of money market, there is no such sub-division in
general. In efficient money market, secondary market transactions may also
take place.
Total volume of trade occur per day in money market is many fold that of the
volume per day taking place in capital market.
In capital market, the financial instruments being dealt with are shares (equity
as well as preference),debentures (a large variety), public sector bonds and
units of mutual funds. On the other hand, money market has different financial
instruments such as treasury bills, commercial papers, call money, certificate
of deposits, etc.