Composite tapes are used to print real-time transaction activity across various financial markets. They were once the primary means of obtaining information on securities and are still used today. The structure records all transactions involving a given security, allowing investors to make informed decisions. Modern technology has provided other ways to enter market activity, but composite tape remains in use.
Composite tapes are the ticker tapes used to print transaction activity on different types of financial exchanges. The composite tape captures real-time information and continuously prints current activity across a variety of different markets. The use of ticker tape once served as the most immediate way for regional exchanges to obtain information about transactions taking place on national exchanges. Even today, many investors and various exchanges continue to actively use the composite tape as the primary means of obtaining information on the performance of securities.
The use of composite tape dates back to the early years of the stock market and the harnessing of the new power of electricity. In the early 20th century, it was not unusual for large companies maintaining large portfolios to have an on-site machine to receive composite tape reads. At the same time, ticker tape machines enabled exchanges around the world to receive updates on the activity happening on other exchanges. For several years, composite tape served as the quickest way to ascertain the current condition of investments without actually being on the trading floor of an exchange.
The usual structure for information transmitted on composite tape is to record all transactions involving a given security, regardless of the exchange where the transactions take place. This allows investors to view a big picture of what is happening with security around the world and get an idea of how trading is affecting the value of the stock. In many cases, being able to view all of this data gathered at once allows the investor to make more informed decisions about what to do with the stock they currently hold.
Modern technology has provided many other ways to enter market activity, but composite tape continues to be used on many exchanges and by many investors today. While today’s ticker tape machines are faster and more efficient than years past, they still tend to function in the same basic way.
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