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NISM Certifications · NISM-Series-VI: Depository Operations · Introduction to the Indian Capital Market

Mrs. Meena Iyer holds shares of a listed company and wishes to know the significance of a stock exchange's role in her investing. Which function is performed by a stock exchange rather than a depository?

Providing a trading platform with price discovery for listed securities is the stock exchange's function. Depositories instead hold securities electronically, record ownership transfers by book entry and maintain beneficial owner accounts through depository participants.

  1. AProviding a platform for trading and price discovery of listed securitiesCorrect
  2. BHolding securities in electronic form on behalf of investors
  3. CEffecting transfer of ownership via book entry on settlement
  4. DOpening and maintaining beneficial owner accounts through participants

Explanation

Exchanges provide the trading platform where buyers and sellers meet and prices are discovered. Holding securities electronically, book-entry transfers and BO accounts through DPs are depository functions. The distractors all describe depository activity, so they are wrong.

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