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Features of money market

  1. High Liquidity: Money market instruments have a maturity period of one year or less, making them highly liquid. They can be easily converted into cash, and investors often use them as close substitutes for cash due to their short-term nature.

  2. Secure Investment: Money market instruments are considered secure investments because they are typically issued by entities with high credit ratings. Additionally, the returns on these instruments are fixed in advance, reducing the risk of losing the invested capital.

  3. Fixed Returns: The returns on money market instruments are predetermined since they are typically offered at a discount to their face value. This allows investors to know in advance the amount they will receive upon maturity.

  4. Physical Trading: Money market instruments are primarily traded over-the-counter (OTC), which means that they are not typically traded online. Instead, investments are made physically through authorized representatives or in person, and physical certificates are issued to buyers.

  5. Regulated by RBI: In India, the money market is controlled and regulated by the Reserve Bank of India (RBI). RBI has significant influence over the organized sector of the money market, and its regulatory actions can impact the entire market.

  6. Maturity of Assets: Money market instruments have a maturity period of less than one year, which distinguishes them from longer-term financial instruments.

  7. Place of Dealing: There is no fixed physical location for money market activities; transactions can be conducted through various means such as telephone, mail, or in-person meetings.

  8. Type of Assets: The money market primarily deals with short-term financial assets, including instruments like Treasury bills, commercial paper, and certificates of deposit.

  9. Brokers: Transactions in the money market can be conducted both with and without the assistance of brokers, depending on the preferences of investors and market participants.

These features collectively make the money market an attractive option for investors seeking liquidity, security, and short-term fixed returns in their investment portfolios.

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