Given below are two statements:
Assertion (A): Screen-based trading has improved the liquidity of the market.
Reason (R): Screen-based trading allows participants to see the prices of all securities in the market while business is being transacted.
In the light of the above statements, choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Both (A) and (R) are true but (R) is not the correct explanation of (A).
Assertion (A): Screen-based trading has improved the liquidity of the market. — True. People from all over the country, and even abroad, can now trade through brokers.
Reason (R): Screen-based trading allows participants to see the prices of all securities in the market while business is being transacted. — True. This is the advantage of transparency.
Why R does not explain A?
R is about traders getting information on prices. It does not say why there are more buyers and sellers. Liquidity improves because a large number of participants can now trade with each other, from anywhere, without knowing each other.
NCERT (Pre-rationalised Edition): “TRADING AND SETTLEMENT PROCEDURE … Electronic trading systems or screen-based trading has certain advantages: “TRADING AND SETTLEMENT PROCEDURE … 4. People from all over the country and even abroad who wish to participate in the stock market can buy or sell securities through brokers or members without knowing each other. That is, they can sit in the broker’s office, log on to the computer at the same time and buy or sell securities. This system has enabled a large number of participants to trade with each other, thereby improving the liquidity of the market.” |