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. Order Splitting

    When brokers split up larger orders to qualify them for the Small ...
  3. Split Block Pricing

    The act of dividing a large order of financial securities into ...
  4. Market Order

    An order that an investor makes through a broker or brokerage ...
  5. Broker

    1. An individual or firm that charges a fee or commission for ...
  6. All Or None - AON

    A condition used on a buy or sell order to instruct the broker ...
RELATED FAQS
  1. What financial regulation exist to control the secondary market?

    The secondary market, most commonly referred to as the stock market, is largely built on self-regulating exchanges that also ... Read Full Answer >>
  2. Why is purchasing stocks on margin considered more risky than traditional investing?

    Buying on margin involves borrowing money from a broker to purchase stock. A margin account increases your purchasing power ... Read Full Answer >>
  3. What is the difference between positive correlation and inverse correlation?

    In the field of statistics, positive correlation describes the relationship between two variables which change together, ... Read Full Answer >>
  4. What are my options when I get a margin call?

    The two options available to an investor when he receives a margin call are to deposit additional funds to his trading account ... Read Full Answer >>
  5. How do I sign up for a Series 63 exam as a foreign national if I don’t have a Social ...

    If you need to sign up for a Series 63 examination but don't have a Social Security or CRD (Central Registration Depository) ... Read Full Answer >>
  6. What is the difference between a sunk cost and an opportunity cost?

    The difference between a sunk cost and an opportunity cost is the difference between money already spent and potential returns ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Principal Trading and Agency Trading

    Ever wonder what happens behind the scenes when you buy or sell a stock? Read on and find out!
  2. Personal Finance

    4 Dishonest Broker Tactics And How To Avoid Them

    Protecting yourself from unscrupulous practices means knowing how to spot them.
  3. Active Trading Fundamentals

    The Basics Of Trading A Stock

    Taking control of your portfolio means knowing what orders to use when buying or selling stocks.
  4. Investing Basics

    Explaining Market Value of Equity

    Market value of equity is the total value of all the outstanding stock as measured in the stock market at a particular time.
  5. Investing Basics

    What is Spread?

    Spread has several slightly different meanings depending on the context. Generally, spread refers to the difference between two comparable measures.
  6. Investing Basics

    What is the Secondary Market?

    The secondary market is where investors purchase securities or assets from other investors, rather than from the issuing companies themselves.
  7. Brokers

    10 Brokers That Pay You To Open An Account

    Open an account with one of these brokers and you will get a bonus. Just be sure it's the right account for your needs.
  8. Brokers

    How Real Estate Agent and Broker Fees Work

    Buying or selling a home? What you need to know about real estate agent and broker fees.
  9. Brokers

    How Brokerage Fees Work

    What you need to know about fees when choosing between a full service and discount broker.
  10. Investing

    What is Asset Management?

    In the investment world, asset management refers to active management of an investor’s portfolio by a financial services company – usually an investment bank.

You May Also Like

Hot Definitions
  1. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  2. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  3. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  4. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  6. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
Trading Center