Which of the following is not a function of Stock Exchange?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → To put a complete stop on activities of speculation.
Option (1) To put a complete stop on activities of speculation. — Not a function of a stock exchange (Correct). A stock exchange does not stop speculation. It provides scope for speculation within the law, in a restricted and controlled manner. Some healthy speculation is needed, because it keeps shares easy to buy and sell and keeps their prices moving smoothly.
Option (2) To provide liquidity and marketability to existing securities. — A function of a stock exchange (Incorrect). The exchange is a ready market. An investor can sell his securities there at any time and turn them into cash.
Option (3) To ensure that the investing public gets a safe and fair deal in the market. — A function of a stock exchange (Incorrect). All trading follows the rules of the exchange and the law, so the investor is protected against unfair dealing.
Option (4) To contribute to economic growth. — A function of a stock exchange (Incorrect). Through the buying and selling of securities, savings flow into productive investment. This helps capital formation and the growth of the economy.
Note: Although the chapter ‘Financial Markets’ was dropped from the NCERT textbooks during rationalisation, it has stayed in the NTA syllabus every year since 2022, except for 2025, and it is part of the syllabus again from 2026. This question is therefore based on the pre-rationalised NCERT, an extract from which is given below. NCERT (Pre-rationalised Edition): “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.” |