DECA Financial Consulting Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

Exchanges play a critical role in reducing risk in financial markets primarily through the implementation of regulations and oversight. Regulations establish a structured environment that promotes transparency, fairness, and integrity in trading activities. This oversight ensures that all participants adhere to certain standards, reducing the likelihood of fraudulent activities or market manipulation.

By ensuring that all trades are conducted in a regulated manner, exchanges help protect investors and maintain confidence in the market. This oversight can include monitoring trading activities, enforcing rules related to reporting and disclosure, and ensuring that all transactions are executed fairly.

In contrast, increasing the number of transactions may actually lead to more volatility, as more trades can exacerbate market movements. Unrestricted trading could lead to chaos, with potential for rampant speculation and increased risk. Similarly, minimizing compliance requirements would likely introduce more uncertainty and risk, as it would allow for less accountability among traders and firms. Therefore, the implementation of regulations and oversight is essential for creating a stable and secure trading environment.