2.10 Money Market Instruments
The money market provides short-term liquidity, safety of principal, and cash equivalents for conservative portfolios.
Key FINRA Exam Takeaways
- High-quality debt instruments with maturities of 1 year or less.
- Commercial Paper: Short-term unsecured corporate promissory notes; max 270-day maturity to remain exempt from 1933 Act registration.
- Jumbo Certificates of Deposit (CDs): Minimum $100,000 denomination; negotiable and trade in secondary markets; FDIC insured.
- Bankers' Acceptances: Used to finance international trade and import/export payments.
- Repurchase Agreements (Repos): Sale of securities with agreement to buy back at higher price; short-term bank liquidity.
Knowledge Checkpoint • Section 2.10
What is the primary reason corporate commercial paper is issued with a maximum maturity of 270 days?