Money market trading is like a subsection of the fixed income market. When someone thinks about fixed income, the idea of bonds pops up in their minds. Actually, in the real sense, a bond is just but one form of fixed income security. The distinction between bond market and money market is that money market is special in that it is focused on short-term debt securities. That means that the debt matures in one year or less. That is the reason why money markets are referred to as cash investments because they have very short maturity period.
Money market securities are basically IOUs that are given by the government, large corporations or financial institutions. These instruments are considered to be very safe hence they are usually referred to as being liquid. Money markets offer very low returns than other forms of securities because of the fact that they are very conservative. One of the major differences between stock market and money market is the fact that money market securities trade using very high or even the highest denominations. This acts as a limit to individual investors. Another difference is that money market is regarded as a dealer market, therefore; companies and firms sell and buy securities using their own accounts. It is also worth noting that these companies trade at their own risk.
This is very different to the stock market because, in stock markets, a broker gets his commission while acting as an agent while the investor is the one who takes the risk by holding the stock. Another major feature of the dealer market is that there is no exchange or trading floor. All the deals are done through electronic systems such as computers or through the phone. The best and the easiest way for anyone to get access to the money markets is through money market mutual funds or through a money market bank account. These accounts contain assets of very many investors and use those funds in order to buy money market securities on behalf of the clients or investors.
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