Question

Choose the incorrect statement from the following about functions of a Stock Exchange:

Options

• Provides liquidity and marketability to new securities

• Ensures safety of transactions

• Contributes to economic growth

• Provides scope for speculation

Answer 1

Provides liquidity and marketability to new securities

Explanation:

A stock exchange provides liquidity and marketability for existing securities rather than new assets. New securities are first launched in the primary market before being traded on a stock exchange in the secondary market. The other statements (B, C, and D) about how a stock exchange works are valid.