What among the following is not an advantage of 'Electronic Trading System'?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → It reduces the efficiency of operations by allowing reduction in time, cost and risk of any error.
Option (1) It ensures transparency by allowing participants to see the price of all securities. — An advantage of the system (Incorrect). Everyone sees the full market, in real time, while trading is going on.
Option (2) It reduces the efficiency of operations by allowing reduction in time, cost and risk of any error. — Not an advantage (Correct). When time, cost and the risk of error go down, efficiency goes up. The book says the system increases the efficiency of operations. One word changed, and an advantage turned into a drawback. Go through each option word by word.
Option (3) It increases the efficiency of information being passed on. — An advantage of the system (Incorrect). Prices and market news reach everyone at once, which helps in fixing prices correctly.
Option (4) Anyone can sell or buy the securities through brokers or members. — An advantage of the system (Incorrect). People from all over the country, and even abroad, can trade from a broker’s office without knowing each other.
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): “Electronic Trading System … 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. |