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Clean Sweep: Informed Trading through Intermarket Sweep Orders

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  • Chakravarty, Sugato
  • Jain, Pankaj
  • Upson, James
  • Wood, Robert

Abstract

An intermarket sweep order (ISO) is a limit order that automatically executes in a designated market center even if another market center is publishing a better quotation. An investor submitting an ISO must satisfy order-protection rules by concurrently submitting orders to the markets with better prices. We find that ISOs represent 46% of trades and 41% of volume in our sample. ISO trades have significantly larger information share despite their small trade size relative to non-ISO trades. Post trade return analysis suggests that informed institutions are the main users of ISO trades.

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Bibliographic Info

Article provided by Cambridge University Press in its journal Journal of Financial and Quantitative Analysis.

Volume (Year): 47 (2012)
Issue (Month): 02 (April)
Pages: 415-435

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Handle: RePEc:cup:jfinqa:v:47:y:2012:i:02:p:415-435_00

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Cited by:
  1. M. Vittoria Levati & Aaron Nicholas & Birendra Rai, 2011. "Testing the Analytical Framework of Other-Regarding Preferences," Development Research Unit Working Paper Series 26-11, Monash University, Department of Economics.
  2. Cappelen, Alexander W. & Sørensen, Erik Ø. & Tungodden, Bertil, 2013. "When do we lie?," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 258-265.
  3. M. Vittoria Levati & Aaron Nicholas & Birendra Rai, 2011. "Testing the Framework of Other-Regarding Preferences," Jena Economic Research Papers 2011-041, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.

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