Trade Shredding and Order Entry Practices

What this video covers

• What trade shredding is: splitting a single customer order into multiple smaller orders or execution reports for the primary purpose of maximizing exchange rebates or in-kind payments to the firm
• Why trade shredding violates best execution obligations even when the customer was not obviously harmed
• How FINRA distinguishes illegal trade shredding from permissible order splitting based on the firm's primary purpose, not the result
• What Initial Public Offering (IPO) trading restrictions prohibit: no member firm transactions in a new issue before the security officially begins trading on its designated exchange
• Why the registration statement effective date is a deliberate exam trap, and why the correct trigger is always the exchange's official start of trading
• How to identify supervisory red flags and apply the rules to Riley-and-Carla-style scenario questions