Money Market Participants
...ns like T-Bills, until the tax revenues are received. This represents the most active secondary market of any money-market instrument. 3. Commercial Banks have a triple-role on the Money Market: borrower, dealer, guarantee-issuer. Commercial banks borrow for their own portfolio, on a short-term or long-term basis, or to satisfy reserve requirements. Commercial banks can also raise funds on the Money Market through repurchase agreements (RP - Repos), meaning a sale of securities together with a simultaneous agreement for repurchase at a later moment. Commercial banks are dealers on the Money Market for the over-the-counter interest rate derivatives (e.g: swap) usually by serving as counterparty to both sides in a transaction. In exchange for a fee, commercial banks provide investors in money-market securities with commitments, like for example a back-up line of credit or a letter of credit. These types of guarantee are widely used by commercial paper issuers and by issuers of municipal bonds. 4. Businesses, both financial and non-financial, raise funds on the Money Market by issuing commercial paper, which is a short-term promissory note, unsecured. Another way for businesses (especially used by those involved in international trade), is bankers acceptance, which is a time draft, drawn and accepted by a bank (used to finance goods that have not been transferred yet from the seller to the buyer). The bank can either hold the acceptance for itself, or sell it on the secondary market. 5. Brokers and Dealers play a key role in marketing new issues of money-market instruments and in providing secondary markets. Dealers are usually an intermediary between other participants. Brokers link borrowers and sellers of money-market instruments and “make a market” by maintaining an inventory of securities and ensure the liquidity of the market. 6. Finance Companies raise funds in the Money Market by selling commercial paper. This type of companies (commercial leasing companies) lends funds to individuals for the purchase of dura...