Which of the following correctly describes the open outcry system once used on stock exchanges?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Deals were struck on the floor of the exchange and shares were sold to the highest bidder.
Option (1) Deals were struck on the floor of the exchange and shares were sold to the highest bidder. — Correct. In the open outcry system, deals were struck among brokers on the floor of the exchange. Prices were shouted out, and shares were sold to the highest bidder.
Option (2) Deals were struck on the floor of the exchange and orders were matched at the best bid and offer price. — Incorrect. Matching orders at the best bid and offer price is done by the computer in screen-based trading.
Option (3) Deals were struck in the broker’s office and shares were sold to the highest bidder. — Incorrect. Trading moved to the broker’s office only after exchanges went electronic.
Option (4) Deals were struck in the broker’s office and orders were matched at the best bid and offer price. — Incorrect. Both parts describe today’s screen-based trading.
NCERT (Pre-rationalised Edition):
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