The call money market is a mechanism that allows both dealers and brokers to locate and borrow funds that can be used for investment needs. The funds located through the money market can be utilized to provide financing for the purchase of securities that can be added to the portfolio of the investment firm, or as a resource that will cover the margin accounts of the firm’s clients.
As a means of securing financing for credit needs, the call money market provides a range of options. Chief among them is the ability to create and manage what is referred to as a call money loan. The call money loan essentially works in the same manner as a day to day loan. Call money loans provide funds that can be used to conduct transactions between banks, or with other money market dealers. Generally, these types of loans are paid off in a short period of time, allowing the broker to move on to secure new loans and continue to process orders on behalf of their clients. The loans may be secured or unsecured, depending on the terms and conditions of the loan, along with the duration and the credit rating of the debtor.
Individual investors generally do not participate directly in the call money market. Instead, the investor will work through a brokerage firm. The broker will determine the best avenue to take in financing an investment, based on the individual circumstances of the client. This process is actually to the advantage of the investor, since the broker will be aware of sources of funding that may or may not be readily accessible to individuals who are looking for financial support to build a portfolio.
The call money market crosses international lines, with funding opportunities located in a number of countries around the world. Because of the inclusion of international banking institutions, the role of the brokerage firm becomes even more vital to the individual investor. Brokers will be aware of applicable banking laws, and how those laws could impact the transaction. This knowledge regarding participants in the call money market allows the firm to pick and choose among possible avenues for funding with a level of efficiency that would be difficult for the individual.
