Ukrainian Academy of Banking of the National Bank of Ukraine Banking Department Money and Credit Lecture 4 Money market Anna Serhiivna Lasukova, PhD, Assistant at Banking Department

Agenda 1. The essence of the money market 2. Structure of the money market 3. Objects of the money market (payment instruments).

The essence of the money market Money market is usually called as a special sector of the market on which the purchase and sale of specific commodity – money are made, demand, supply and price of this product are formed.

Sale of money takes the form of transferring money to the contractors by their owners for temporary use in exchange for financial instruments that give them the opportunity to keep ownership of that money to restore the right to dispose of them and receive interest income. Buying is a form of obtaining money market players at their disposal a sum of money in exchange for financial instruments. The essence of the money market

Financial instruments - a commitment to buyers by sellers of money. The essence of the money market

Money market instruments depending on the type of commitment Debt obligations include all obligations for which the money buyer agrees to return money and payment to seller. Non-debt obligations include commitments to extend the right to participate in the management of buyer's money and his income. These commitments have the form of shares.

Market segments can be pointed out by several criteria: by type of instruments used to move in money from sellers to buyers; by institutional features of cash flows; by the economic purpose of money that bought on the market. Structure of the money market

The money market by type of financial instruments Structure of the money market  Market of loan commitments - covers banking relationships with their clients on the formation and location of credit.  Stock exchange - covers both credit relations and relations of co- ownership, which are made by special instruments (securities) that can be sold, bought, redeemed.  Foreign exchange market - covers the relationship between economic agents about buying and selling currency based on supply and demand.

The money market by type of financial instruments Structure of the money market  Market of bank loans - provides accumulation of free funds and grant them as loans on terms of repayment, maturity and payment. Institutional bodies are commercial banks.  Market of services of non-bank financial institutions - provides accumulation of savings and placing them in earning assets. Institutional bodies are: insurance companies, pension funds, investment funds.  Stock market – carries out the movement of non-bank loan capital, which is driven by financial values. Institutional bodies are stock exchanges.

The money market by economic purpose of money sale Structure of the money market  On money market funds are bought on short-term (one year). These funds are used in the back of the borrower (buyer) the money, that is to propel the already accumulated capital, so they quickly released turnover and returned to the lender.  On the capital market funds bought a long (more than one year) term. These funds are used to increase the mass of the core and working capital employed in the back of the borrowers.

Objects of the money market (payment instruments) Any payment transaction has two sides - the flow of information, containing details of payment, and direct cash flow. These two streams are always linked, but can move in different ways and have a discrepancy in time.

In payment transactions the main elements can identified:  obligations that must be performed;  side, making the payment (payer);  party receiving payment (receiver);  methods of payment;  one or more financial intermediaries (usually a bank) that transfer payments, writing off the required amount from the payer and assigns it to the beneficiary.. Objects of the money market (payment instruments)

 Bill of exchange  Promissory note  Cheque  Bank plastic card Payment instruments Objects of the money market (payment instruments)