What is Consolidated Tape?

Investors associated with the stock market are accustomed to stock market fluctuations. This is the result of volatility that arises based on the real-time factors that may affect the investor’s sentiments where they buy or sell the shares to cut losses or make profits. However, as the affecting factors are numerous, traders can't analyse each of them and make an informed investment decision.

Since they can not keep track of all the affecting factors themselves, they make use of a technologically backed system equipped with analysing real-time data. One such widely used electronic system is called Consolidated Tape.

What is Consolidated Tape?

Consolidated tape is a technologically backed electronic system that collects real-time data listed on the stock exchange and provides the same to the investors. The data collected by the consolidated tape pertains to the prices and volume of the stocks being traded on the stock exchange. It is widely used by big stock market exchanges such as NASDAQ, New York Stock Exchange etc., to report trades and provide quotes on various stocks to reduce the chances of loss for investors. Every entry on the consolidated tape contains the following information:

• The ticker symbol of each company trading on the stock exchange.
• The number of shares traded represents the trading volume.
• The price per share for each completed trade.
• The current price of the stocks in comparison with the previous day’s closing price.

Understanding Consolidated Tape

The stock market runs on various types of data generated by the intermediaries who either create the security or trade in the market. The consolidated tape is an electronic system that aims to collect data generated in the stock market by stock exchanges, brokers, dealers and electronic communications networks (ECNs). Since a security may trade on multiple stock exchanges, the consolidated tape reports the security’s activity on all the stock exchanges it is trading on. It allows investors to analyse the factors affecting the trading activity and decide on adjusting their current positions or entering a new one.

The Consolidated Tape is managed by the Consolidated Tape Association and is chaired by Emily Kasparov of the Chicago Stock Exchange, the youngest and first woman to lead the association. The data reported by the consolidated tape comes from two networks named Network A and Network B.

• Network A reports trading activity for securities listed on the New York Stock Exchange.
• Network B reports trading activity for securities listed on the NYSE Amex, Bats, ECNs, PHLX options exchange and the regional exchanges.

How does the Consolidated Tape operate?

The Network A of the consolidated tape is managed by the New York Stock Exchange, while the American Stock Exchange manages Network B. The Securities and Exchange Commission registered market centres, and exchanges send their quotes and trades to a central consolidator. From thereon, the data is fed to Consolidated Tape System (CTS) and Consolidated Quotation System (CQS), resulting in data streams that are distributed worldwide.

The CTS and CQS receive all the data related to the trading activity of securities listed on various stock exchanges. The data received follows a predefined message format. Each message validates its format and verifies the information against the database. The data is then cross-checked with other market centres’ information, and when completed, it is disseminated to the recipients of the data.

Every trading activity is stored in the electronic system so that the recipients can access it in real-time or after trading hours. The consolidated tape system maintains a master database which is managed by the Consolidated Tape System. The master database is updated regularly with each completed trade in the stock market.

History of Consolidated Tape

The consolidated tape was first introduced in 1976 as a follow-up of mechanical ticker tapes and the subsequent electronic ones in the 1960s. Before the investigation of the consolidated tape, mechanical machines were used by brokers to print long strips of paper containing stock quotes and reports. The first instance of the telegraphic ticker-tape dates back to 1867 when Edward Calahan invented the first ticker machine.

However, it was later in 1871 that Thomas Edison improved the original telegraphic ticker tape and patented the design. When there were no electronic systems, brokers used to ensure an uninterrupted supply of the tape to receive data on the most recent activity and transaction for a particular stock.

However, with the advent of technology and the stock market shifting from an open outcry system to digital platforms, the use of consolidated tape has become widely famous. Now, brokers, stock exchanges, investors etc., use the electronic system to receive information about every activity related to a particular stock without having to print pages of reports.

Final Word

Investors base their investment decisions on market data; how the price is doing, how much is the trading volume, and the market sentiment. Although the information is individually available, collecting the information from different sources is not possible. It takes extended time and effort to get the data and make decisions based on the collected information. To simplify collecting data, investors use consolidated tape to understand the overall market trend and ensure their investments are on the right track.