A money market futures contract is a standardized agreement to buy or sell a money market security at a particular price on a specified future date. There is also a futures contract based on a 30-day average of the daily federal funds rate. A money market futures option gives the holder the right, but not the obligation, to buy or sell a money market futures contract at a set price on or before a specified date. The smooth functioning of the money market depends critically on brokers and dealers. They play a key role in marketing new issues of money market instruments and in providing secondary markets where outstanding issues can be sold prior to maturity.
Dealers use RPs to finance their inventories of securities.
They also act as intermediaries between other participants in the RP market by making loans to those wishing to borrow in the market and borrowing from those wishing to lend in the market. Brokers match buyers and sellers of money market instruments on a commission basis. They play a major role in linking borrowers and lenders in the federal funds market. Brokers are also active as intermediaries in trades between dealers in various of other markets. The Federal Reserve is a key participant in the money market.