Financial Industry Regulatory Authority (FINRA) Practice Exam 2026 - Free FINRA Practice Questions and Study Guide

Negotiable Certificates of Deposit (CDs) are indeed classified as money market instruments due to their liquidity and their role in short-term borrowing and investment. A negotiable CD can be bought and sold in the secondary market, which adds to its liquidity and appeal as a short-term investment. These instruments typically have maturities ranging from a few weeks to a few years and are issued by banks to raise funds.

Regular, non-negotiable CDs, however, are not typically classified as money market instruments because they cannot be transferred to another party in the secondary market; they are issued for a fixed term and must be held to maturity. This lack of negotiability restricts their liquidity compared to negotiable CDs.

In summary, the correct statement is that only negotiable CDs are considered money market instruments, as they are designed for short-term funding, can be traded, and meet the liquidity criteria of money market assets.