Difference between Money Market and Capital Market.
Money Market can be defined as financial instruments with high liquidity and very short maturities are traded. Basically used by participants as a means for borrowing and lending in the short term, from several days to just under a year. Money market is treated as a safe place due to the highly liquid nature of securities and their short term maturities. Hence, the money market is a market place where short term obligations such as treasury bills and banker’s acceptances are bought and sold. Capital market is a market place in which individuals and institutions trade financial securities. Capital markets that trade equity (stocks) and debt (bonds) instruments with maturities of more than one year (long term maturity). Organizations as well as institutions in the public and private sectors also often sell securities on the capital markets in order to raise funds.
AØ Primary capital market instruments say IPOs of shares, stocks, etc.
BØ Primary money market instruments say IPOs of T-bills,
CØ Secondary capital market instruments say shares and stocks outstanding
DØ Secondary money market instruments like dentures and bonds outstanding with the maturity of less than one year.
Difference between Money Market and Capital Market
| Money market | Capital market |
| A money market is a place for short term lending and borrowing, typically within a year. It deals in short term debt financing and investments. | Capital Market refers to the stock market, which indicated for trading in shares and bonds of companies on recognized stock exchanges. |
| Money Market purchases and sells new instruments rather than trading in outstanding claims. | In the capital market, we used to see old instruments are traded |
| Here, ‘near money’ instruments like short-term government debt, commercial papers may be found. | Here, longer-term instruments are available. |
| It is Subject to a very slight price risk. | It shows considerable price variation. |
| Individual players cannot investments through an in the money market as the value of investments is large. | Anybody can make investments through a broker. |
| Debt instruments only | Equity instruments only |
| It is more secure than the capital market. | It contained a high risk and high return. |
| Deals are transacted on phone or through electronic systems | Trading is through recognized stock exchanges. |
Dif
ference between Money Market and Capital Market
