MONEY MARKETS

MONEY MARKETS

In the last decades, one may speak about a globalization of the economic activity of the European countries. Trade, production and investment have become more international. The new market has facilitated the settlement of debts resulting from the international trade. The capital flows from a country to another one easily because the fixes rates of exchange have been dropped and one currency is used in the EU.

Deals are transacted with a counter party, i.e. customers, banks, financial institutions; the dealer is doing this job. Deals are effected by phone or electronic system, either directly or by means of a broker who gets a commission for this.

An inter bank foreign exchange market is created; it is a form of network, between commercial banks, central banks, brokers, customers who can communicate easily, using computers, phones, e-mails. Foreign exchange traders make markets, speculate in different currencies.

Money markets can be defined as market places for short term lending and borrowings (it means less than 90 days) and are, in fact, networks of dealers and institutional investors. For dealing on such markets, there are used short debt instruments which are financial instruments such as certificates of deposits, commercial papers, bankers acceptances, treasury bills. New York, London, Tokyo are famous for their money markets. The dealers are in constant communication with each other, with borrowers and investors taking advantage of the arbitrage opportunities.

Answer the following questions:

Can you tell what the last decades look like?

How are deals transacted?

What do you know about bank foreign exchange market?

What is a money market?

What do you know about it?

What do the dealers do?

Vocabulary

Arbitrage (transfer non speculative de fonduri, de la o piata la alta )

Asked price (pret solicitat)

Bid (pret la care un market maker cumpara actiuni)

Broker (agent care pune in legatura doua parti, oferindu-le acestora posibilitatae de a incheia un contract intermediat de el)

Capital market (piata de capital)

Cross rate (rata de schimb intre doua sisteme valutare exprimata intr-un al treilea sistem valutar)

Currency backing (aur sau valori care mentin puterea internationala a unui sistem valutar

Currency future (contracte futures in care se cumpara/vinde, la o anumita rata de schimb)

Dealer (comerciant de orice fel)

Financial market (piata financiara)

Foreign exchange (schimb valutar)

Hard currency (sistemul valutar al unei tari care are o economie puternica)

Hedging (operatiune facuta de un comerciant/ dealer care doreste sa protejeze o pozitie vulnerabila)

Investment securities ( active financiare folosite pentru investitii)

Maturity date (data la care un document ajunge la maturitate)

Money market (piata britanica a imprumuturilor pe termen scurt)

Primary market (piata care vinde pentru prima data titlurile de valoare)

Secondary market (piata secundara care comercializeaza titluri de valoare existente)

Spread (diferenta intre pretul de vanzare si cel de cumparare)

Trader (persoana care face negot)