Money markets are the mechanisms that allow people to trade money for securities and other future-based consumption commodities to facilitate raising of capital, transfer of risk and international trade. It differs from financial markets because it is transacted in short-term basis that usually lasts within one year. The market operates such as the borrower will issue a security to the lender for the latter money that can be used for short-term financing while the former is required to pay the rent through interests or dividends. Common money market instruments in United Kingdom are the bank deposits, certificate of deposit, very short-term fixed interest securities, and floating rate notes ().
Bank deposits or deposit account provides banks to hold authority over the deposits for a certain period of time enough to address their investment purposes. Usually, they impose quota and discouraging policies against the depositors who intend to withdraw such savings accounts for banks to have greater prospect to invest such in money markets or mortgages. Parallel to bank deposits, certificate of deposits serve the same purpose for banks, including thrift and credit unions. However, these is considered a time deposit, in effect, gives the depository bank exact period on which it could obtain on-hold of the deposits with little policies. As such, banks have more leverage to use them in money markets. These two money market instruments are the most common tool of banks participating in the money market wherein their short-term inclination as deposits are aligned with the returns imposed by money markets for participating .
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