Money Market

The money market is the market for short-term financial instruments. Money market instruments include Treasury bills, bankers acceptances, commercial paper, Federal funds, municipal notes, and other securities. The common characteristic of money market instruments is that they all have maturities of one year or less, and often 30 days or less. The money market does not have one fixed physical location. Rather, trading in money market instruments takes place in large financial centers, like New York and London. Companies and investors often use money market securities as temporary "parking places" for storing cash. While the returns on money market instruments are relatively low, they are among the safest of investments. Indeed, most money market securities are considered cash equivalents and are included with cash on a company's balance sheet. A money market fund is a mutual fund that invests in money market securities. While money market instruments already have low risk, the diversity of instruments in a money market fund provides even greater safety. And although money market funds are not Federally insured, they are highly regulated by the SEC.

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