Question

Statement-I : The basic function of a Stock Exchange is the creation of a continuous market where securities are bought and sold.
Statement-II : The Stock Exchange provides both liquidity and easy marketability to already existing securities in the market.
Choose the correct option from the following:

• A. Statement-I is true and Statement-II is false
• B. Statement-II is true and Statement-I is false
• C. Both the Statements are true
• D. Both the Statements are false

Hint:

Stock exchange function questions often test liquidity provision and market continuity - two sides of the same coin.

Answer 1

The Correct Option is C

Both statements accurately describe stock exchange functions:
Statement I Analysis: 
1. Market Creation: - Provides trading platform (NSE/BSE trading floors) - Ensures price discovery through bid-ask spreads 
2. Continuity: - Regular trading hours (9:15 AM-3:30 PM in India) - Market makers ensure constant liquidity 
Statement II Analysis: 
1. Liquidity Provision: - Enables quick conversion to cash - Example: Blue-chip stocks can be sold instantly 
2. Marketability: - Standardized listing requirements - Electronic settlement systems (NSDL/CDSL) Interrelation: - Continuous market (I) enables liquidity (II) - Both are SEBI-recognized primary functions 
Final Answer: (C) Both the Statements are true