8. The Interbank Market.

The financial system and trading of currencies among banks and financial institutions, excluding retail investors and smaller trading parties. While some interbank trading is performed by banks on behalf of large customers, most interbank trading takes place from the banks' own accounts.

When seeking funds for borrowing, consumers, financial speculators, and corporations contact a bank representative to discuss the terms of the proposed credit agreement. These discussions and transactions between clients and banks take place at the retail level, where banks charge a premium over the cost of the funds acquired in the wholesale market in order to make a profit. The interbank market is the name of the wholesale market where banks trade between themselves in order to remain liquid and meet customer demands for deposits, withdrawals, and borrowing for many different purposes.

The main difference between the interbank market and the retail market (that is, the bank counter) is the interest rate charged on borrowed funds. Since commercial banks have access to the central bank of the nation, they are able to acquire funding at a much lower cost than what it available to the end-user. By passing the low-cost money acquired through the terms and conditions set and maintained by the central bank to the consumer at a higher price, banks can make a profit, and stay in business.

The interbank market is also the medium where the vast majority of forex transactions take place.

Understanding the interbank market can be beneficial because of its role as the circulatory system of a nation’s economy. Tensions in the interbank market are reflected in the various other financial markets as widening spreads, lack of liquidity, increased volatility, and currency shortages. If banks themselves are unable to obtain the funds necessary to maintain their own businesses, they will be unable to extend credit to consumers, firms, mortgage borrowers, students, and many other types of borrowers.

9. Treasury bills.

Treasury bills - State securities representing long-term government obligations. First released in 1877 in the UK Treasury bills usually relate to marketable securities. Issued for 3b and 12 months (in the UK - 91 days), usually on the bearer does not have interest coupons. Implemented mainly among banks at a discount to face value and redeemed at full face value. Thus, holders of Treasury bills are paid equal to the difference between the nominal price at which they are redeemed, and the selling price. The issue and redemption of treasury bills regularly performed on behalf of the central bank treasuries. One part of the treasury bills can be placed on the principles of the weekly auction by an anonymous subscription to which the subscriber specifies desired , but not less than the minimum specified value discount Treasury ( Treasury prefers those subscribers who presented the greatest demand on acceptable terms the Treasury ) . Another part of the treasury bills can be realized by buying their central bank (in this case Treasury bills appear as non-marketable government securities). In some countries, the central bank has an unlimited right to issue treasury bills (" ticket -free ").

Treasury bills are widely used in the interbank money market. In the U.S., from the 2nd half of 1970. Treasury bills - to futures transactions. Banks and other lending institutions use treasury bills for short-term investments. Central banks use issue treasury bills and operations with them to control the level of interest rates and liquidity across the credit system. Treasury bills are one of the most liquid assets, the rates on them are usually much lower than in other monetary instruments.