'Stock exchanges provide an opportunity for investors to disinvest and invest.'

Identify the related function of the stock exchange.

Providing liquidity and marketability to existing securities

The correct answer is option 2- Providing liquidity and marketability to existing securities.

Providing liquidity and marketability to existing securities is highlighted in the given lines.

Providing Liquidity and Market ability to Existing Securities: The basic function of a stock exchange is the creation of a continuous market where securities are bought and sold. It gives investors the chance to disinvest and reinvest. This provides both liquidity and easy marketability to already existing securities in the market.

OTHER OPTIONS

• Pricing of Securities: Share prices on a stock exchange are determined by the forces of demand and supply. A stock exchange is a mechanism of constant valuation through which the prices of securities are determined. Such a valuation provides important instant information to both buyers and sellers in the market.

• Spreading of Equity Cult: The stock exchange can play a vital role in ensuring wider share ownership by regulating new issues, better trading practices and taking effective steps in educating the public about investments.

• Providing Scope for Speculation: The stock exchange provides sufficient scope within the provisions of law for speculative activity in a restricted and controlled manner. It is generally accepted that a certain degree of healthy speculation is necessary to ensure liquidity and price continuity in the stock market.