Question

Which of the following is not a function of Stock Exchange?

• A. To put a complete stop on activities of speculation.
• B. To provide liquidity and marketability to existing securities.
• C. To ensure that the investing public gets a safe and fair deal in the market.
• D. To contribute to economic growth.

Hint:

Stock exchanges allow controlled, healthy speculation to ensure liquidity.
They never aim to put a complete stop to speculation.

Answer 1

The Correct Option is A

Concept:
A stock exchange is a regulated secondary market where previously issued shares, debentures, and government securities are traded.
It provides liquidity, ensures transparent pricing, and channels capital into productive economic activities.

Step 1: Identifying the Core Functions of a Stock Exchange:
1. Providing Liquidity and Marketability: Gives investors the ability to convert existing securities into cash quickly.
2. Pricing of Securities: Establishes market clearing prices based on continuous supply and demand.
3. Safety of Transactions: Operates under well-defined legal rules, ensuring fair and secure trading for the public.
4. Contributes to Economic Growth: Channels savings into productive corporate investments through capital reallocation.
5. Providing Scope for Speculation: Provides a regulated environment for healthy, controlled speculation, which helps maintain trading liquidity and market activity.

Step 2: Analyzing the Incorrect Function:
Option (A) states that the stock exchange aims “to put a complete stop on activities of speculation.”
This is incorrect because stock exchanges do not ban speculation; healthy speculation is recognized as necessary for liquidity and price discovery, provided it is conducted within legal boundaries.

Step 3: Verification of Options:
Options (B), (C), and (D) are established functions of a stock exchange.
Option (A) contradicts the standard role of stock exchanges, making it the correct answer to the question.

Step 4: Final Answer:
Hence, the correct option is (A).