Capital Market and Money Markets
A financial market that works as a conduit for demand and supply of debt and equity capital. It channels the money provided by savers and depository institutions like banks, credit unions, and insurance companies among others, to borrowers and investees through a variety of financial instruments like bonds, notes, and shares that are referred to as securities. A capital market is not a compact unit, but a highly decentralized system made up of three major parts: stock market, bond market, and money market. It also works as an exchange for trading existing claims on capital in the form of shares.
Essentially, capital is wealth, usually in the form of money or property. Capital markets exist when two groups interact: those who are seeking capital and those who have capital to provide. The capital seekers are the businesses and governments (sometimes individuals) who want to finance their projects and enterprises by borrowing or selling equity stakes. The capital providers are the people and institutions who are willing to lend or buy, expecting to realize a profit. By participating in the stock and bond markets, which are the pillars of the capital markets, you commit your capital by investing in the equity or debt of issuers that you believe have a viable plan for using that capital. Because so many investors participate in the capital markets, they make it possible for enterprises to raise substantial sums enough to carry out much larger projects than might be possible otherwise.
Money market on the other hand is the 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