Introduction: Collateralized Borrowing and Lending Obligation (CBLO)", as the name implies is a fully collateralized and secured instrument

for borrowing / lending money. CBLO as a product is conceived and developed by CCIL for the facilitating deployment in a collateralized environment. As a product, CBLO aims to benefit those entities who have been phased out of Call/ Notice money market and / or those entities on restrictions have been placed on the borrowing / lending in call / notice money market. CBLO Dealing system is hosted and maintained by Clearcorp Dealing Systems (India) Ltd, a fully owned subsidiary of CCIL. CCIL becomes Central Counterparty to all CBLO trades and guarantees settlement of CBLO trades. CBLO is an RBI approved money market instrument which can be issued for a maximum tenor of one year. CBLO is a discounted instrument traded on Yield Time priority. CBLO instrument that are generally made available for trading are those with maturity of next seven business days and three month end dates. The balances are maintained in electronic book entry. The access to CBLO Dealing system for NDS Members is made available through INFINET and for non NDS Members through Internet. The Funds settlement of members in CBLO segment is achieved in the books of RBI for members who maintain an RBI Current Account and are allowed to operate that current account for settlement of their secondary market transactions. In respect of other members, CBLO Funds settlement is achieved in the books of Settlement Bank. What is CBLO? CBLO: Is an RBI approved Money Market instrument; Is an instrument backed by Gilts as Collaterals; Creates an Obligation on the borrower to repay the money borrowed along with interest on a predetermined future date; A Right and Authority to the lender to receive money lent along with interest on a predetermined future date; Creates a charge on the Collaterals deposited by the Borrower with CCIL for the purpose; Membership: Membership to CBLO segment is generally extended to Repo eligible entities as per RBI guidelines. CBLO Membership is granted to NDS Members and non NDS Members. The entity type eligible for CBLO Membership are Nationalized Banks, Private Banks, Foreign Banks, Co-operative Banks, Financial Institutions, Insurance Companies, Mutual Funds, Primary Dealers, Bank cum Primary Dealers, NBFC, Corporate, Provident/ Pension Funds etc. Entities who have been granted CBLO Membership are classified based on their NDS Membership. CBLO Members who are also NDS Members are CBLO (NDS) Members and other CBLO Members are CBLO (Non NDS) Members or Associate Members.

Eligible Securities: Eligible securities are Central Government securities including Treasury Bills as specified by CCIL from time to time.

Definition of 'Collateralize d Borrowing And Lending Obligation CBLO'

A money market instrument that represents an obligation between a borrower and a lender as to the terms and conditions of the loan. Collateralized borrowing and lending obligations (CBLOs) are used by those who have been phased out of or heavily restricted in the interbank call money market.

Investopedia explains 'Collateralized Borrowing And Lending Obligation - CBLO'

CBLOs were developed by the Clearing Corporation of India (CCIL) and Reserve Bank of India (RBI). The details of the CBLO include an obligation for the borrower to repay the debt at a specified future date and an expectation of the lender to receive the money on that future date, and they have a charge on the security that is held by the CCIL.

COLLATERALISED BORROWING & LENDING OBLIGATION (CBLO)

CCIL launched a new money market instrument, the Collateralised Borrowing and Lending Obligation (CBLO). It is a variant of liquidity adjustment facility, permitted by RBI. It is a mechanism to borrow and lend funds against securities for maturities of 1 day to 1 year.

It is a tripartite repo transaction involving CCIL as 3rd party, which functions as intermediary or common counter party to borrower as well as lender. Borrower will be able to repay back even before maturity, compared to payment on due date under the existing Repo system. CBLO is expected to meet the needs of banks, FIs, PDs, MFs, NBFCs and companies for deploying their surplus funds, which have been phased out of the call money market operations. CBLO is issued at a discount to face value. Under CBLO, securities of borrower will be held in their constituent SGL account opened with CCIL and will not be transferred to lender. Collateralised Borrowing and Lending Obligation (CBLO) CBLO is another money market instrument operated by the Clearing Corporation of India Ltd. (CCIL), for the benefit of the entities who have either no access to the inter bank call money market or have restricted access in terms of ceiling on call borrowing and lending transactions. CBLO is a discounted instrument available in electronic book entry form for the maturity period ranging from one day to ninety days (up to one year as per RBI guidelines). In order to enable the market participants to borrow and lend funds, CCIL provides the Dealing System through Indian Financial Network (INFINET), a closed user group to the Members of the Negotiated Dealing System (NDS) who maintain Current account with RBI and through Internet for other entities who do not maintain Current account with RBI. Membership to the CBLO segment is extended to entities who are RBI- NDS members, viz., Nationalized Banks, Private Banks, Foreign Banks, Co-operative Banks, Financial Institutions, Insurance Companies, Mutual Funds, Primary Dealers, etc. Associate Membership to CBLO segment is extended to entities who are not members of RBI- NDS, viz., Co-operative Banks, Mutual Funds, Insurance companies, NBFCs, Corporates, Provident/ Pension Funds, etc. By participating in the CBLO market, CCIL members can borrow or lend funds against the collateral of eligible securities. Eligible securities are Central Government securities including Treasury Bills, and such other securities as specified by CCIL from time to time. Borrowers in CBLO have to deposit the required amount of eligible securities with the CCIL based on which CCIL fixes the borrowing limits. CCIL matches the borrowing and lending orders submitted by the members and notifies them. While the securities held as collateral are in custody of the CCIL, the beneficial interest of the lender on the securities is recognized through proper documentation. Membership Membership to the CBLO segment is extended to entities who are RBI- NDS members, viz., Nationalized Banks, Private Banks, Foreign Banks, Co-operative Banks, Financial Institutions, Insurance Companies, Mutual Funds, Primary Dealers, etc. Associate Membership to CBLO segment is extended to entities who are not members of RBI- NDS, viz., Co-operative Banks, Mutual Funds, Insurance companies, NBFCs, Corporates, Provident/ Pension Funds, etc.

Eligible securities
Eligible securities are Central Government securities including Treasury Bills, and such other securities as specified by CCIL from time to time.

Money market mutual funds A money market fund is a mutual fund open-ended scheme that invests solely in cash/cash equivalent securities with less than one year maturity, which are also often referred to as money market instruments. These investments are short-term very liquid investments with high credit rating. Money market fund's purpose is to provide investors with a safe place to invest in easily accessible cash-equivalent assets characterized as a lowrisk, low-return investment. Because of their relatively low returns, it might not be feasible to use money market funds as a long-term investment option. This is mutual fund scheme that holds the objective to earn interest for investors without compromising the depletion of fund's Net Asset Value (NAV). Portfolios of money market mutual funds are comprised of short-term (less than one year) securities representing high-quality, liquid debt and monetary instruments. This scheme is not suitable for those who are willing to park their money for medium to long term say one year or above, because the returns generated by these schemes are much less than when compared to bank deposits with maturity period more than one year. Investors with a short investment horizon or with surplus cash and low risk appetite can invest in money market funds. These could include corporate as well as retail investors. If you don't have a large amount of cash in your savings bank account, then this option may not be not of interest to you. But if you have large cash surplus than money market funds can give you better returns than savings accounts.

Advantages: In a falling market it is observed that traders flee the market by selling their holdings to minimize their losses. In those times of crisis, money market mutual funds are good investment options for investors. These funds are also a great investment tools for those investor who are interested for a comparatively safer investment option. Large financial institutions like banks and government approach money market mutual funds to manage their short term liquidity. Individual investors can invest in these funds through mutual fund companies.

Safety of the money invested The main reason people use banks to hold their money is not because of the lucrative returns but because it gives a sense of security. On top of the physical security of a bank, there is the protection of the India Government. On the other hand, money market mutual funds are safe in a different way. There is no backing from the India Government, but the SEBI (Securities Exchange Board of India) carefully monitors money market funds like other mutual fund schemes. They generally only invest in financially reliable securities which have an average maturity of less than 365 days. This results in a lot of Central government securities, State Government Bonds, Top rated debt instruments etc in the money market fund's portfolio which are the safest debt instruments. These money market mutual funds have a lower yield than the average market, but a better rate than your savings account.

Returns A savings account might give you less return than Money market funds. This doesn't mean that you will always get better returns, but it does mean your chances of getting better returns are higher than with a savings account.

As with bonds, the performance of money market funds are closely tied to the interest rates set by the Reserve Bank of India. When rates in the market are at very low levels, these types of funds tend to generate returns on the lower end of the range and not much more than a savings account. So make sure to be aware of the current interest rate environment and how it compares to your savings account rate before you move your money to a money market fund.

Accessibility Money market funds are comparable to savings accounts as far as liquidity goes. There is usually free checkwriting, electronic money transfer, facility to redeem without lock-in period etc. .

What money market securities are available in India? Money market mutual funds can invest in below securities 1. 2. 3. 4. Treasury Bills (T-Bills) Repurchase Agreements (Repos) Commercial Papers Certificate of Deposits

Selecting a Fund The various types of funds all invest in the same basket of securities within their section (Government securities, high rated bonds etc) so the returns of a particular fund might vary a minor percent from the others in its section. A fund with low operating costs therefore will generally produce better yields. Annual operating expenses should be your measuring stick when analyzing a fund. If a mutual fund is successful, the larger amounts of capital it controls will translate into lower operating expenses for investors. Keep in mind that although these investments are considered low risk, in their attempt to outperform, some have reached for higher-yielding instruments that are outside the norm, including company deposits, low rated debt instruments etc. so do your due diligence before investing in any of these funds. Thus we can say that money market offers superior avenues for deployment of bulk short term funds in terms of risk, return and liquidity. Money market mutual funds make it possible for retail investors to participate in money markets. Money market mutual funds enable retail investors to earn money market yields otherwise available to large and institutional investors. Money market mutual funds are usually rated by the rating agencies. So, check for the fund ratings before investing ^3

Money Market Mutual Funds

A money market fund is a mutual fund that invests solely in money market instruments. Money market instruments are forms of debt that mature in less than one year and are very liquid. Treasury bills make up the bulk of the money market instruments. Securities in the money market are relatively risk-free. Money market funds are generally the safest and most secure of mutual fund investments. The goal of a moneymarket fund is to preserve principal while yielding a modest return. Money-market mutual fund is akin to a highyield bank account but is not entirely risk free. When investing in a money-market fund, attention should be paid to the interest rate that is being offered. Types Money of market Money funds Market are Mutual two Funds types:

of

1. Institutional Money Market Mutual Funds: These funds are held by governments, institutional investors and businesses etc. Huge sum of money is parked in institutional money funds. 2. Retail Money Market Mutual Funds: Retail money market funds are used for parking money temporarily. The investment portfolio of money market funds comprises of treasury bills, short term debts, tax free bonds etc. Special Features of Money Market Mutual Funds

Money market mutual funds are one of the safest instruments of investment for the retail low income investor. The assets in a money market fund are invested in safe and stable instruments of investment issued by governments, banks and corporations etc.

Generally, money market instruments require huge amount of investments and it is beyond the capacity of an ordinary retail investor to invest such large sums. Money market funds allow retail investors the opportunity of investing in money market instrument and benefit from the price advantage.

Money market mutual funds are usually rated by the rating agencies. So, check for the fund ratings before investing.

Definition An open-end mutual fund which invests only in money markets. These funds invest in short term (one day to one year) debt obligations such as Treasury bills, certificates of deposit, and commercial paper. The main goal is the preservation of principal, accompanied by modestdividends. The fund's Net Asset Value remains a constant $1 per share to simplify accounting, but the interest rate does fluctuate. Money market funds are very liquid investments, and therefore are often used by financial institutions to store money that is not currently invested. Unlike bank accounts and money market accounts, most deposits are not FDIC insured, but the risk is extremely low (only those funds administered by banks are FDIC-insured, but some others are privately insured). Although money market mutual funds are among the safest typesof mutual funds, it still is possible for money market funds to fail, but it is unlikely. In fact, the biggest risk involved

in investing in money market funds is the risk that inflation will outpace the funds' returns, thereby eroding the purchasing power of the investor's money. also calledmoney fund or money market fund

Investors interested in the money market can access it most easily through money market mutual funds, but these vehicles do not let smaller investors off the hook when it comes to having a rudimentary understanding of the Treasury bills, commercial paper, bankers acceptances, repurchase agreements and certificates of deposit (CDs) that make up the bulk of money market mutual fund portfolios. In this article, we'll show you how money market funds work and how they can benefit you. Purpose of Money Market Mutual Funds for Investors There are three instances when money market mutual funds, because of their liquidity, are particularly suitable investments. 1. Money market mutual funds offer a convenient parking place for cash reserves when an investor is not quite ready to make an investment or is anticipating a near-term cash outlay for a non-investment purpose. Money market mutual funds offer ultimate safety and liquidity. This means that investors will have an expected sum of cash at the very moment that they need it. (For more on this, read Get A Short-Term Advantage In The Money Market.) 2. An investor holding a basket of mutual funds from a single fund company may occasionally want to transfer assets from one fund to another. If, however, the investor wants to sell a fund before deciding on another fund to purchase, a money market mutual fund offered by the same fund company may be a good place to park the proceeds of sale. Then, at the appropriate time, the investor may exchange his or her money market mutual fund holdings for shares of the other funds in the fund family. 3. To benefit their clients, brokerage firms regularly use money market mutual funds to provide cash management services. Putting a client's dormant cash into money market mutual funds will earn the client an extra percentage point (or two) in annual returns above those earned by other possible investments. (To read more about the money market, check out The Money Market tutorial.) Operational Details of Money Market Mutual Funds Money market mutual funds are designed to offer features that are particularly suited to the needs of small investors. Minimum initial investments generally range from $500 to $5,000. You can purchase money market mutual funds directly from brokerage companies or mutual fund firms, just as you would purchase a stock or equity mutual. As investment advisors, some banks also sell money market funds and some even have their own proprietary funds that offer money market investment opportunities. These should not be confused with money market accounts, which are interest-earning savings accounts. Money market mutual funds also offer some simplified withdrawal features that are more typically associated with bank or trust accounts. For example, money market funds allow investors to withdraw assets by writing checks, usually of a minimum amount around $500 per check. If the investor does not want to write a check as a means of

withdrawing funds, he or she can easily redeem shares by requesting payment by mail or by remittance through a wire transfer to his or her bank account. Categories of Money Market Mutual Funds Money market mutual funds may contain a specific type of money market security or a combination of securities across a wide spectrum: One particular type of fund limits its asset purchases to U.S. Treasury securities. Another class of money market funds purchases both U.S. government securities and investments in various government-sponsored enterprises (GSEs). The third and largest class of money market mutual funds invests in a variety of money market securities that offer the highest degree of security.

Another important categorization for money market mutual funds relates to their taxable or tax-exempt status. Taxable funds invest in securities such as Treasury bills and commercial paper, whose interest income is subject to federal taxation. Tax-exempt funds invest exclusively in securities that are issued by state and local governments and are exempt from federal taxation. Tax-exempt funds generally appeal to investors in higher federal tax brackets who are seeking tax savings on the overall interest income generated by their portfolios. Tax-exempt money market mutual funds have the potential to offer a triple-whammy tax reprieve for some investors! Some tax-exempt funds purchase only securities issued by governments within a particular state. If an investor can find such a fund for his or her home state, that investor can earn interest income that is exempt from federal, state and perhaps even local income taxes. Conclusion Just as equity and fixed-income mutual funds have greatly simplified the world of investing, money market mutual funds have made money market investing accessible to individual retail investors. Money market mutual funds are among the safest and most liquid financial instruments widely available. Moreover, money market funds offer modest initial investment requirements and provide simple procedures for withdrawing funds by check or transfer to a bank account. Finally, if they choose carefully, purchasers of certain tax-exempt money market funds may also enjoy relief from federal, state and even local taxation.

Types of money funds

[edit]Institutional

money fund

Institutional money funds are high minimum investment, low expense share classes which are marketed to corporations, governments, or fiduciaries. They are often set up so that money is swept to them overnight from a company's main operating accounts. Large national chains often have many accounts with banks all across the country, but electronically pull a majority of funds on deposit with them to a concentrated money market fund. The largest institutional money fund is the JPMorgan Prime Money Market Fund, with over US$100 billion in assets. Among the largest companies offering institutional money funds are BlackRock, Western Asset, Federated, Bank of America, Dreyfus, AIM and Evergreen(Wachovia).

[edit]Retail

money fund

Retail money funds are offered primarily to individuals. Retail money market funds hold roughly 33% of all money market fund assets. Retail money funds come in a few different breeds: government-only funds, non-government funds [citation and tax-free funds. Yields are typically somewhat higher than in savings accounts. needed] Investors will obtain a slightly higher yield in the non-government variety, whose principal holdings are high-quality commercial paper and other instruments; of course, such funds may get in trouble if fears emerge about previously well-regarded companies. Instruments of the United States Government (and funds holding them) are usually exempt from state income taxes, and conversely, "muni bond funds" are generally exempt from federal income tax. In both cases, yields are (almost always) lower, but may result in better conservation of value depending an individual investors' tax situation. The largest money market mutual fund is Fidelity Investments' Cash Reserves (Nasdaq:FDRXX), with assets exceeding US$110 billion. The largest retail money fund providers include: Fidelity, Vanguard (Nasdaq:VMMXX), and Schwab (Nasdaq:SWVXX).

If you have a mattress full of money, you might want to consider purchasing a money market fund. A money market fund offers similar protection as the mattress, but offers the benefit of paying a yield on your money. What Is a Money Market Fund? A money market fund is a mutual fund that invests in short-term, high-quality fixed income securities. The goal of a money market fund is to have a net asset value that does not deviate from $1 per share. In other words, if you invest $1,000 in a money market fund, the goal is to return $1,000 plus a nominal yield (generally close to 90 day T-bill rates). Losses in money markets have been rare, but, unfortunately, they have occurred. Money market funds are regulated by the US Securities and Exchange Commission (SEC). The SEC seeks to assure that risks are limited and investors interests are protected. SEC Rule 2a-7 governs several areas: Maturity of Holdings: Money market funds cannot hold investments with a maturity of greater than 397 days. The weighted average maturity of the portfolio cannot exceed 90 days. Credit Quality: No less than 5% of a money market funds holdings may be in investments that are in the second-highest short-term rating categories. Diversification: Money market funds are required to maintain a diversified portfolio. A money market fund cannot have any one holding that exceeds 5% of the value of the fund (with the exception of US Treasury and government agency holdings).

Advantages of Money Market Funds The regulation of money market funds is the key to several advantages: Safety: Preservation of capital the objective of money market funds. While a few money market funds have broken the buck (gone below $1) in most cases, the fund company or sponsor has stepped in to absorb the losses. Liquidity: Money market funds provide excellent access to cash. Most brokerage accounts, including Schwab and Fidelity, offer a money market fund as a sweep option. In other words, when an investment is bought/sold money comes out of/goes into, the money market fund. Yield: Money market funds pay a yield based on the holdings of the underlying fund. The yield is generally automatically reinvested into the fund via purchase of additional shares in the fund. This yield makes money market funds an attractive alternative to the mattress. As with all investing, it is recommended that you read the prospectus, along with other available shareholder reports and information.

Disadvantages

There are disadvantages associated with money market accounts. They generally have higher minimum deposit requirements than do other savings accounts and are not intended for higher levels of transaction activity. After the allowable number of transactions has been met, there is a fee charged for subsequent transactions. Some accounts require a fee for monthly maintenance and this fee is more likely to be higher if the balance in the account is lower. As an investment, money market accounts underperform other instruments. Stocks, bonds and other instruments yield far more return, and money market deposits are generally considered to be cash when balancing a portfolio. Because of the high variability in the rates paid for different accounts by different institutions, depositors should do some research to locate the best rates available.

Money Market Mutual Fund

Finance Mutual Funds Money Market

A money market mutual fund is a type of fund which invests in short-term interest bearing debt instrument. These securities are highly liquid and provide safety of investment. A money market mutual fund is also known as a liquid mutual fund. It is the safest investment option when compared to other mutual funds. However, even these funds are exposed to fluctuations in the interest rate. It is an open-ended mutual fund.

The typical investment option for liquid funds include "Treasury Bills", "Commercial Papers" and "Certificate of Deposit". Money market fund is a substitute to bank savings but they are not government insured. However, this fund is as safe as a bank deposit and yields high income. The objective of investing in such funds is to preserve the principal amount of investment and earn dividend on it. The biggest risk involved in investing in a money market fund is the risk of inflation, as price rise can highly affect the purchasing power of the investors. The concept of money market fund is even older than some of the stock exchanges. It is one of the historic type of mutual fund. The financial structure of any economy is based on two types of market, namely stock market and money market. The stock market is nothing but making investment in securities of various companies, on the other hand money market is investment made in short term debt instruments. The working of a money market fund is simple. The mutual fund manager pools together the share of some investors and invests either the entire amount or partial amount in the most beneficial instrument. The fund manager selects a well performing and secured money market instrument. These instruments can be bought and sold in order to earn profit, or it can be retained till the maturity. Money market fund is the most safest form of mutual fund investment. The investor is likely to earn a conservative and a consistent return on investment because these funds are unaffected by economic fluctuations. A money market mutual fund is governed by the United States Securities and Exchange Company Act of 1940. This regulation ensures protection of investment with limited risk. Features Here are some of the significant features of the fund. Diversification A diversified portfolio is required for a money market inves tment. It cannot have any one type of a holding that exceeds 5% of the value of the fund. It is a significant characteristic of this type of investment. Maturity The funds cannot be invested for a period which exceeds the limit of 397 days. The average maturity of the portfolio is a period of 90 days. Therefore, it is a type of short-term investment in mutual funds.

Credit categories of funds. Advantages and

Quality

The investor should hold at least 5% of the total investment in short -term

Disadvantages

It is a very old mutual fund which has various advantages and disadvantages of investment. The following are some of the advantages and disadvantages of investing in a money market mutual fund. Advantages The regulation of the fund is the most important advantage of a money market mutual fund. However, there are certain other benefits of investments which are as follows Safety Safety is what all the investors look for when they plan to invest. It is the most important advantage of investing in a money market mutual fund. The objective of investment is to preserve the amount of capital invested. These funds are considered to be the most safest investment in mutual funds. Return on Investment

The income is earned on the amount of money invested in the mutual fund. The income so earned is actually re-invested by purchasing a new fund. These fund give a conservative income. Disadvantages Like other investments mutual funds also have some disadvantages. It is important to consider these drawbacks before you decide to invest in money market mutual funds. Here are some of the drawbacks. Fluctuating Return on Investment

Like many other investments, mutual funds do not guarantee a stable return on your investment. There is a possibility of depreciation. The stocks that make up a fund might face price fluctuation which will eventually hamper the growth of your fund. Another important thing t o keep in mind before investing is, these funds are not insured unlike bank deposits. returns. Over-diversification of Portfolio So if you have bought funds and the company becomes bankrupt, you will lose out on the principal amount of money, forget the

Diversification of funds is advantageous because it reduces the risk factor involved in the investment. However over-diversification is not good. It happens when you have invested more number of funds from a particular industry.

Liquidity Money market mutual fund are liquid in nature. It brings a pool of money from various investors and pulls out money for withdrawal at the same time. These transactions needs a lot cash on a daily basis. So there is ample amount of unused cash kept in the fund. It is good as far as liquidity is considered but if that money is lying in the fund unused, then it is not advantageous for you. Costs Mutual fund investment comes with a cost. The investor will have to pay fees which are categorized into two types, shareholder fees and operating fees. These fees are mandatory and it is a part of the process of buying funds. It is paid by every investor regardless of the performance of the fund. If you are investing in a particular fund it is important to consider the good and the bad points of that fund. If the advantages offered by the fund weigh more than the disadvantages, then the fund can be considered for investment. It is always good to research about the fund and the company before you buy them. A little bit of homework will be helpful in making appropriate decisions. Money market mutual fund is a safe investment for those investors who do not keep a track on the stock market and money market on a daily basis.