Tape Shredding

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.

BREAKING DOWN '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. All Or None - AON

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

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

    1. An individual or firm that charges a fee or commission for ...
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. Your Practice

    How Do Edward Jones and Merrill Lynch Compare?

    Merrill Lynch and Edward Jones have both been around for decades, but they approach business very differently. Here's the lowdown on how they compare.
  5. Mutual Funds & ETFs

    How to Beat Back ETF Fees

    Fees are an inescapable aspect of investing, but here are some small things you can do to lessen their impact on your ETF returns.
  6. Investing Basics

    How To Choose The Right Online Trading Broker

    The online broker market is becoming more competitive, but differences exist in services that can help traders choose the broker that’s right for them.
  7. Personal Finance

    How to Pick the Right Stockbroker

    A stockbroker can play an invaluable role in growing your investments, but not all brokers are created equally. Use this guide.
  8. Fundamental Analysis

    4 Online Broker Stocks For Your Portfolio In 2016 (AMTD, ETFC)

    Should you use your online broker to invest in your online broker's own publicly traded stocks?
  9. Investing Basics

    The Top 25 Broker-Dealer Firms in 2015

    The country's largest broker-dealer firms by annual revenue are clearly doing lots of things right, but they're also facing a massively shifting market.
  10. Brokers

    Duck These Illegal Sales Tactics Used By Brokers

    Many unscrupulous brokers employ illegal swindling tactics to sell bad securities. Here are sales strategies that should indicate red flags to investors.
RELATED FAQS
  1. How long does a stock account have to be dormant before it can be escheated?

    A stock account is typically considered dormant and eligible for escheatment after five years of inactivity; however, this ... Read Full Answer >>
  2. What is the interest rate offered on a typical margin account?

    Interest rates on margin accounts vary according to the size of the loan and the brokerage firm being used. Generally, interest ... Read Full Answer >>
  3. What is the cost of a share purchase?

    When investors purchase shares of stock, the price paid includes two components: the price of the stock and the fee charged ... Read Full Answer >>
  4. What is the difference between fee-based advisors and commission-based advisors?

    The difference between a fee-based adviser and a commission-based adviser is that the former collects a flat fee for investment ... Read Full Answer >>
  5. What is the difference between a custodian bank and a mutual fund custodian?

    Custodian banks and mutual fund custodians, commonly known as mutual fund corporations, perform very similar roles for different ... Read Full Answer >>
  6. How does an insurance broker make money?

    An insurance broker makes money off commissions from selling insurance to individuals or businesses. Most commissions are ... Read Full Answer >>
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center