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. Broker

    1. An individual or firm that charges a fee or commission for ...
  5. Market Order

    An order that an investor makes through a broker or brokerage ...
  6. All Or None - AON

    A condition used on a buy or sell order to instruct the broker ...
RELATED FAQS
  1. 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 >>
  2. What does the variance between the bid and ask price of a stock mean?

    The variance between a security's bid price and its ask price, also known as the bid-ask spread, represents the different ... Read Full Answer >>
  3. When is a share purchase marked as 'settled' by a brokerage?

    The T+3 rule governs the settlement of stock share purchases. Per the rule, set by the Uniform Practice Code, purchases of ... Read Full Answer >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
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. Professionals

    Top Strategies on How to Become a Stock Broker

    Gunning to be a stock broker and want an edge? Here's some veteran advice.
  5. Trading Systems & Software

    Steps to Starting Up an Independent Broker Dealer

    Launching your own broker-dealer is a lot of work, but the potential payoff is great, both personally and financially.
  6. Brokers

    Can Tradier's Brokerage API Replace Traditional Brokers?

    Tradier, an up-and-coming brokerage firm that’s carving a niche for itself as the world’s “first brokerage API company,” according to spokesperson Frances Del Valle.
  7. 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.
  8. 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.
  9. 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.
  10. 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.

You May Also Like

Hot Definitions
  1. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  2. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  3. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  6. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
Trading Center