Certified Financial Management Specialist Practice Exam

What is one key characteristic of physical location stock exchanges?

1. They operate entirely online

2. They rely on electronic systems for trades

3. They have tangible locations for trading

4. They only trade bonds

The correct answer is: They have tangible locations for trading

A key characteristic of physical location stock exchanges is that they have tangible locations for trading. This means that there is a physical building or venue where traders and brokers meet to conduct transactions in person. This characteristic is essential to the traditional model of stock exchanges, where floor trading occurs, and transactions are executed via open outcry or direct negotiation among traders present at the exchange. In contrast, online operations and electronic systems are features of electronic exchanges rather than physical ones, which highlights the distinguishing factor of having an actual trading floor. Furthermore, while stock exchanges may facilitate the trading of various securities, including bonds, the defining aspect in this context is the presence of a physical location where trades are executed face-to-face. This tangible presence fosters interpersonal interaction and is a hallmark of traditional stock exchange trading environments.