Similarities in Capital and Money Markets

Capital Markets

Capital markets are any financial market or exchange that trades in financial products, such as stocks -- the main equity security -- and bonds -- the main debt security -- as well as other products, such as futures and options contracts.

Money Market

The money market focuses on short-term debt. Short-term debt means financial products -- bonds, loans, promissory notes -- that the issuer will pay back within 52 weeks. Much of the debt traded on capital markets has even shorter periods, like overnight bank loans or Treasury bills that mature in a matter of weeks.

Similarities

Both types of markets move billions of dollars a day, making them extremely important in the global economy. Businesses and governments rely on both markets to raise money to pay for operations or expand activities. Furthermore, both markets are largely intangible. Most of the trading occurs through computerized trading platforms, not in physical market places or exchanges. While the floor of the New York Stock Exchange is the icon of the capital market, the number of traders on its floor decrease every year and the CEO of NASDAQ has called it a relic.

Differences

Capital markets trade in both debt and equity, which is ownership investment, such as stocks. While both capital markets and the money market restrict who can trade directly, the money market is the near exclusive realm of very large institutions, banks and governments, while individuals can gain access to capital markets by opening a brokerage account.