A money market is a market for short term debt instruments (maturity below one year). It is highly liquid market wherein securities are bought and sold in large denominations, to reduce transaction costs. Call money market, certificate of deposits, commercial paper, and treasury bills are the major instruments/segments of the money market.

The function of money market is:

• to serve as an equilibrating force that redistributes cash balances in accordance with the liquidity needs of the participants.
• to form a basis for the management of liquidity and money in the economy by monetary authorities
• to provide a reasonable access to the users of short-term money for meeting their requirements at realistic prices.

As it facilitates the conduct of monetary policy, a money market constitutes a very important segment of the financial system