What is one purpose of organized markets?

An organized market serves several essential functions, and one of its primary purposes is to provide liquidity. Liquidity refers to the ease with which assets can be bought or sold in the market without causing a significant impact on their price. An organized market facilitates this by ensuring that there are numerous buyers and sellers, as well as standardized trading practices. This environment encourages active trading, allowing participants to enter or exit positions quickly, which is vital for efficient price discovery and managing investment risk.

The presence of liquidity is crucial for the functioning of financial markets since it helps to ensure that market participants can transact efficiently. When liquidity is high, the bid-ask spread tends to narrow, enabling more favorable trading conditions for investors.

The other options do not accurately reflect the primary purpose of an organized market. Limiting trading to specific hours is related to market structure but not a fundamental purpose of the market itself. Controlling the entry of new participants could create barriers to participation and limit market dynamism, which is contrary to the principle of a healthy market. Eliminating price transparency would negatively impact market efficiency by preventing participants from making informed decisions based on pricing information.