Posted in Finance, Accounting and Economics Terms, Total Reads: 324
Definition: Open Market Rate
Open market operations are handled by the central bank of a nation for implementing financial policies and controlling the circulation of printed money in the nation’s economy. This is done by sale and purchase of securities. These securities may be in the form of loans, government bonds, etc. The rate of interest paid on the debt securities trading in open market is known as Open Market Rate.
Open market rates are volatile and respond to supply and demand patterns of the debt instruments in the market. However, open market rate is not the same as discount rate applicable on bonds and also differs from the interest rate charged by commercial bankers. Open market rates are not controlled by any specific authority since they are traded internationally.
Currently open market rates are easily accessible online with the list of foreign currency instruments and their ongoing purchase and sale rates. These are updated automatically in synch with the market trends.