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In Financing, what is Fast Tape?

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  • Written By: A. Leverkuhn
  • Edited By: Andrew Jones
  • Last Modified Date: 14 February 2020
  • Copyright Protected:
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    Conjecture Corporation
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In the finance world, fast tape refers to a kind of event in futures trading where there are so many trades going on that a fixed value can’t be presented. When that happens, price relay mechanisms might replace a fixed value with a “FAST” marker, or disclaimer, while possibly presenting a range of values. Finance pros describe a fast tape event as too many trades in the “pit” or “ring” where futures trading is occurring.

The issue of fast tape is just part of the challenge around volatility for a particular market. Addressing volatility means looking at how changes for an asset such as an equity can change suddenly. The U.S. Securities and Exchange Commission, SEC, has traditionally looked at volatility to make relevant rules for financial markets in America.

Individual investors have to know how to deal with volatility. In a traditional stock equity market, one way to deal with volatility is with a limit order for trades, as opposed to a market order. A marker order allows a trade to be made by a broker at virtually any price. A limit order creates a limit for the trade price, thus protecting the investor.

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In specialized markets, different kinds of rules apply to market volatility. Knowing about fast tape events, and how they are handled, can help an investor deal with volatility in futures trading. This kind of experience can also come in helpful for commodities and other kinds of equities.

The fast tape event is so called based on an original “ticker tape” method for recording stock or equity prices. A fast tape event might go along with something called “digits deleted,” where a tape skips some digits of printing in order to keep up with fast trading. Yet another kind of trading event is called “painting the tape.” This is when a group of traders conspired to create an artificial trading activity in order to trick others. This kind of practice is illegal.

In addition to all of these, there is a related idea where a single trader goes against the upward or downward flow of trades. This is called “fighting the tape,” and some brokers look on it unfavorably. The above kinds of terms illustrate some of the challenges of creating an orderly market and maintaining that order even when changes in value and heavy trading produce unique results for recording futures values.

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