Question

Q7. Consider the following statements:

1. Shares which are pledged are more vulnerable than the market.

2. Securities and Exchange Board of India (SEBI) has made it mandatory for companies to disclose to the stock exchanges every time a pledge that is part of derivative market is created.

Which of the above statements are correct?

• A. a) 1 only
• B. b) 2 only
• C. c) Both 1 and 2
• D. d) Neither 1 nor 2

Answer 1

The correct option is C

c) Both 1 and 2

• Shares which are pledged are more vulnerable than the market. Such shares have a tendency to react much more than market movement. And if a company whose shares are pledged is part of the derivatives segment, then it is a walking signboard inviting trouble.
• The derivatives market is the financial market for derivatives, financial instruments like futures contracts or options, which are derived from other forms of assets.
• The market can be divided into two, that for exchange-traded derivatives and that for over-the-counter derivatives.
• Securities and Exchange Board of India (SEBI) has made it mandatory for companies to disclose to the stock exchanges every time a pledge that is part of derivative market is created.