Which of the following statement is/are correct regarding function of Stock Exchange?
A. Providing liquidity and market ability to existing securities.
B. Training of intermediaries.
C. Undertaking steps of investor protection.
D. Promotion of fair practices and code of conduct in securities market.
E. Regulation of takeover bids by companies.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → A only
A. Providing liquidity and market ability to existing securities — A function of a stock exchange (Correct). The stock exchange gives a continuous market where securities are bought and sold. Investors can sell (disinvest) and invest again, so the securities get liquidity and easy marketability.
B. Training of intermediaries — Not a function of a stock exchange (Incorrect). This is a development function of SEBI.
C. Undertaking steps of investor protection — Not a function of a stock exchange (Incorrect). Protecting the interests of investors is an objective and a protective function of SEBI, the regulator.
D. Promotion of fair practices and code of conduct in securities market — Not a function of a stock exchange (Incorrect). Developing a code of conduct and fair practices for brokers and other intermediaries is a task of SEBI.
E. Regulation of takeover bids by companies — Not a function of a stock exchange (Incorrect). This is a regulatory function of SEBI.
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): “SECONDARY MARKET The secondary market is also known as the stock market or stock exchange. It is a market for the purchase and sale of existing securities. It helps existing investors to disinvest and fresh investors to enter the market. It also provides liquidity and marketability to existing securities. …” “Development Functions 1. Training of intermediaries of the securities market.” “Objectives of SEBI … 2. To protect the rights and interests of investors, particularly individual investors and to guide and educate them.” “4. To regulate and develop a code of conduct and fair practices by intermediaries like brokers, merchant bankers etc., with a view to making them competitive and professional.” “Regulatory Functions … 4. Regulation of takeover bids by companies.” |