Tape Racing

tape racing

An illegal transaction technique in which a registered representative takes advantage of a large customer order by transacting business for a personal account before transacting the customer's order. A registered representative with a significant order likely to affect the price of a security can take personal advantage of that situation by tape racing.

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Tape Racing

An illegal act in which a broker or other representative, just before filling a large order on behalf of a client, conducts a transaction in the same security on his/her own account. A large order to buy or sell usually affects the price of a security; the broker conducts the transaction hoping to profit on the movement in price after he/she fill the client's order. This is a form of insider trading, as the broker filling the order knows something about the market's probable movement that other market participants do not know.