Q.Stock exchange acts as a regulator of the securities market. It creates a continuous market where the securities are bought and sold. It gives investors the chance to disinvest and reinvest. Through this process of disinvestment and reinvestment, savings get channelized into their most productive investment avenues. To ensure that the investing public gets a safe and fair deal in the market, the membership of the stock exchange is well regulated and its dealings are well defined according to the existing legal framework. It also ensures wider share of ownership by regulating new issues, better trading practices and taking effective steps in educating the public about investments. Various functions performed by the Stock Exchange are discussed in the above para. By quoting lines from the above para, state any four functions of stock exchange.
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Start your 14-day free trial to unlock the full solution →The passage illustrates four functions of a stock exchange: providing liquidity and marketability, contributing to economic growth, ensuring safety of transactions, and spreading the equity cult — each stated in a specific line of the paragraph.
The stock exchange is the backbone of the secondary securities market. The given paragraph captures four of its standard functions, and each can be pinned to an exact line. This is a frequently asked CBSE Class 12 Business Studies 'quote-the-lines' question, so the lines are quoted below.
1. Providing liquidity and marketability to existing securities. The paragraph says, 'It creates a continuous market where the securities are bought and sold,' and 'It gives investors the chance to disinvest and reinvest.' A continuous market lets an investor buy or sell at any time during trading hours, so securities can be converted into cash quickly — this liquidity is what makes them attractive.
2. Contribution to economic growth. The text states, 'Through this process of disinvestment and reinvestment, savings get channelized into their most productive investment avenues.' By continually reallocating capital from less productive to more productive uses, the exchange promotes capital formation and, in turn, economic growth.
3. Safety of transactions. The paragraph notes that 'To ensure that the investing public gets a safe and fair deal in the market, the membership of the stock exchange is well regulated and its dealings are well defined according to the existing legal framework.' Rule-bound membership and dealings give ordinary investors confidence they will not be cheated. …
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