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Clean Sweep: Informed Trading through Intermarket Sweep Orders

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

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

Volume (Year): 47 (2012)
Issue (Month): 02 (June)
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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