Money Market
Market for short-term debt securities, such as banker's acceptances, commercial paper, repos, negotiable certificates of deposit, and Treasury Bills with a maturity of one year or less and often 30 days or less. Money market securities are generally very safe investments which return a relatively low interest rate that is most appropriate for temporary cash storage or short-term time horizons. Bid and ask spreads are relatively small due to the large size and high liquidity of the market.
The money market is a component of the financial markets for assets involved in short-term borrowing and lending with original maturities of one year or shorter time frames. Trading in the money markets involves Treasury bills, commercial paper, bankers' acceptances, certificates of deposit, federal funds, and short-lived mortgage- and asset-backed securities.[1] It provides liquidity funding for the global financial system.
Money Market Instruments
-Short-term, high grade (low risk) financial instruments such as bankers' acceptance, certificates of deposit (CDs), commercial paper, and treasury bills.
-Document (such as a check, draft, bond, share, bill of exchange, futures or options contract) that has a monetary value or evidences a legally enforceable (binding) agreement between two or more parties regarding a right to payment of money.
Debt instrument:
Document that serves as a legally enforceable evidence of a debt and the promise of its timely repayment. Banker's acceptance, bills of exchange, bonds, certificates of deposit, debentures, and promissory notes, all are debt instruments.
Equity instrument:
Document that serves as a legally enforceable evidence of the right of ownership in a firm, such as a share certificate (stock certificate).
Financial instrument
Capital Market
A capital market is a market for securities (debt or equity), where business enterprises companies) and governments can raise long-term funds. It is defined as a market in which money is provided for periods
longer than a year, as the raising of short-term funds takes place on other markets (e.g., the money market).
The capital market includes the stock market (equity securities) and the bond market (debt). Capital markets may be classified as primary markets and secondary markets.
In primary markets, new stock or bond issues are sold to investors via a mechanism known as underwriting.
In the secondary markets, existing securities are sold and bought among investors or traders, usually on a securities exchange, over-the-counter, or elsewhere.
Capital Market: Participants
The Capital market, an important ingredient of the financial system, plays a significant role in the economy of the country.
1. Regulatory Bodies
The Securities and Exchange Commission exercises powers under the Securities and Exchange
Commission Act 1993. It regulates institutions engaged in capital market activities.
Bangladesh Bank exercises powers under the Financial Institutions Act 1993 and regulates institutions engaged in financing activities including leasing companies and venture capital companies.
2. Participants in the Capital Market
The SEC has issued licences to 27 institutions to act in the capital market. Of these, 19 institutio ns are Merchant Banker & Portfolio Manager while 7 are Issue Managers and 1(one) acts as Issue Manager and Underwriter.
i) Stock Exchanges
There are two stock exchanges ( the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) ) which deal in the secondary capital market. DSE was established as a public Limited Company in April 1954 while CSE in April 1995. As of 30 June 2000 the total number of enlisted securities with DSE and CSE were 239 and 169 respectively. Out of 239 listed securities with the DSE, 219 were listed companies, 10 mutual funds and 10 debentures.
ii) Investment Corporation of Bangladesh (ICB)
The Investment Corporation of Bangladesh was established in 1976 with the objective of encouraging and broadening the base of industrial investment. ICB underwrites issues of securities, provides substantial bridge financing programmes, and maintains investment accounts, floats and manages closed-end & open-end mutual funds & closed-end unit funds to ensure supply of securities as well as generate demand for securities. ICB also operates in the DSE and CSE as dealers.
iii) Specialized Banks
Bangladesh Shilpa Bank (BSB), Bangladesh Shilpa Rin Sangstha (BSRS), BASIC Bank Ltd., some Foreign
Banks and NCBs are engaged in long term industrial financing.