What is Tape Shredding?
Tape shredding occurs when asplits a large buy or sell order into a of smaller buy or sell orders.
How Does Tape Shredding Work?
Let's say Company XYZ is a huge pensionwith billions of dollars under management. It wants to buy 500,000 of Company ABC, but not all at once -- doing that would create a buying frenzy in the for the shares and drive the price above what Company XYZ wants to pay for the shares.
Accordingly, Company XYZ'sshreds the tape by placing a long series of 10,000 buy orders for Company ABC shares. These orders are easier to fill as well.
Why Does Tape Shredding Matter?
Shredding the tape can speed up a broker plans to fulfill the order. Tape shredding is generally legal, but regulators become very interested if the technique is used for more than just order execution.'s ability to fill orders, and it sometimes generates more commissions for those . Accordingly, clients who place orders should be clear ahead of time about how exactly the