"Valuation provides important instant information to both buyer and sellers".
Identify the function of stock exchange.
Answer & explanation
Correct answer: option 4
The correct answer is option (4)- Pricing of securities.
"Valuation provides important instant information to both buyer and sellers" represent the Pricing of securities function of stock exchange.
Pricing of Securities: Share prices on a stock exchange are determined by the forces of demand and supply. A stock exchange is a mechanism of constant valuation through which the prices of securities are determined. Such a valuation provides important instant information to both buyers and sellers in the market.
OTHER OPTIONS
- Safety of Transaction: The membership of a stock exchange is well- regulated and its dealings are well defined according to the existing legal framework. This ensures that the investing public gets a safe and fair deal on the market.
- 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.
- Provides liquidity : It offers liquidity to investors by providing a market where they can buy or sell securities with ease. This liquidity allows investors to convert their investment into cash quickly.