Consider the following facts about stock exchange.
(A) Stock exchange provides scope for speculation
(B) Stock exchange regulates takeover bids by companies
(C) Stock exchange controls insider trading by imposing penalties
(D) Stock exchange ensures safety of transactions
(E) Stock exchange spreads equity cult
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A), (D) and (E) only
(A) Stock exchange provides scope for speculation — True (Correct). The stock exchange gives scope for speculation within the law, in a restricted and controlled way. Some healthy speculation keeps the market liquid.
(B) Stock exchange regulates takeover bids by companies — False (Incorrect). “Regulation of takeover bids by companies” is a regulatory function of SEBI, not of a stock exchange.
(C) Stock exchange controls insider trading by imposing penalties — False (Incorrect). “Controlling insider trading and imposing penalties for such practices” is a protective function of SEBI.
(D) Stock exchange ensures safety of transactions — True (Correct). The membership of a stock exchange is well-regulated and its dealings follow the law. So investors get a safe and fair deal.
(E) Stock exchange spreads equity cult — True (Correct). Equity cult means the habit of investing in shares. The stock exchange spreads it by better trading practices and by teaching the public about investments.
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): “6. 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.” “Regulatory Functions … 4. Regulation of takeover bids by companies.” “Protective Functions … 2. Controlling insider trading and imposing penalties for such practices.”
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