Tape Shredding

AAA

DEFINITION of 'Tape Shredding'

When a broker divides an order for securities into a number of smaller orders. For certain securities, smaller orders can be easier to fill, so brokers have the ability to tape shred when they believe that doing so will speed up the rate at which the order is filled.

INVESTOPEDIA EXPLAINS 'Tape Shredding'

Allowing tape shredding to happen also opens the doors for unscrupulous brokers to split a large order into many small orders for the sake of generating extra commission, as brokers are compensated for each order they fill.

However, various self-regulatory organizations and stock exchanges have limited tape shredding to only apply for order execution purposes. The use of tape shredding for other reasons could have serious consequences.

RELATED TERMS
  1. Limit Order

    An order placed with a brokerage to buy or sell a set number ...
  2. All Or None - AON

    A condition used on a buy or sell order to instruct the broker ...
  3. Market Order

    An order that an investor makes through a broker or brokerage ...
  4. Order Splitting

    When brokers split up larger orders to qualify them for the Small ...
  5. Broker

    1. An individual or firm that charges a fee or commission for ...
  6. Split Block Pricing

    The act of dividing a large order of financial securities into ...
Related Articles
  1.  These are the two main types of trades that investors will encounter: principal and agent transactions.
    Investing Basics

    Principal Trading and Agency Trading

  2. Personal Finance

    4 Dishonest Broker Tactics And How To ...

  3. Active Trading Fundamentals

    The Basics Of Trading A Stock

  4. Brokers

    How long does it take a broker to confirm ...

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center