The money market, sometimes called the cash market, is a sub-section of the fixed income securities market and characterized by trading in low-yield, short-term government and corporate debt that matures in less than a year. These instruments are generally considered extremely safe, although global money markets have recently also suffered from higher interest rates and volatility.
Unlike most financial markets, the money market is a dealer market, meaning that investors buy and sell the securities at their own risk without intermediaries or a central trading floor. Instead of through brokers, money-market instruments - which include Treasury bills, certificates of deposit (CDs), Eurodollars, commercial paper and banker's acceptances (BAs) - trade over the telephone or via electronic trading platforms, usually in very high denominations. Retail investors can gain exposure via money-market funds (essentially mutual funds of short-term debt) and money-market deposit accounts.
Investors in money-market funds received an unexpected jolt in mid-September 2008 when sector pioneer Reserve Primary Fund announced it had "broken the buck", or returned a loss of three cents on the dollar, after investing in Lehman Brothers' debt. No other fund has reported similar losses and analysts said its unlikely they would, although smaller funds are more vulnerable. Money market deposit accounts operated by banks, by contrast, are insured for up to $250,000 by the Federal Deposit Insurance Commission (FDIC)