Consider the following statements about the advantages of screen-base…

Consider the following statements about the advantages of screen-based trading:

(A) It allows participants to see the full market during real time.

(B) It brings all the trading centres spread over the country onto one trading platform, that is, the depository.

(C) It increases efficiency of information being passed on, thus helping in fixing brokerage charges efficiently.

(D) It enables a large number of participants to trade with each other, improving the liquidity of the market.

(E) It increases the efficiency of operations by reducing time, cost and risk of error.

How many of the above statements are correct?

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Three

(A) It allows participants to see the full market during real time. — Correct. Screen-based trading ensures transparency. Participants see the prices of all securities while business goes on.

(B) It brings all the trading centres spread over the country onto one trading platform, that is, the depository. — Incorrect. All the trading centres are brought onto one platform, the stock exchange, on the computer. The depository only keeps securities in electronic form.

(C) It increases efficiency of information being passed on, thus helping in fixing brokerage charges efficiently. — Incorrect. Faster flow of information helps in fixing prices efficiently, as the screens show prices and market news. Brokerage charges do not come into it.

(D) It enables a large number of participants to trade with each other, improving the liquidity of the market. — Correct. People from all over the country, and even abroad, can trade through brokers without knowing each other. More traders improve the liquidity of the market.

(E) It increases the efficiency of operations by reducing time, cost and risk of error. — Correct. Computers cut time, cost and the risk of error, so operations become more efficient.

NCERT (Pre-rationalised Edition): “TRADING AND SETTLEMENT PROCEDURE … Electronic trading systems or screen-based trading has certain advantages:
1. It ensures transparency as it allows participants to see the prices of all securities in the market while business is being transacted. They are able to see the full market during real time.
2. It increases efficiency of information being passed on, thus helping in fixing prices efficiently. The computer screens display information on prices and also capital market developments that influence share prices.
3. It increases the efficiency of operations, since there is reduction in time, cost and risk of error.
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.
5. A single trading platform has been provided as business is transacted at the same time in all the trading centres. Thus, all the trading centres spread all over the country have been brought onto one trading platform, i.e., the stock exchange, on the computer. …”